Gn Store Nord A/S Adr

Hello, everyone, and welcome to GN's conference call in relation to a Q1 report announced yesterday evening. Participating in today's call is Group CEO Peter Karlstrømmer, Group CFO Søren Jelert, and myself, Rune Sanner, head of Investor Relations. The presentation is expected to last about 20 minutes, after which we'll turn to the Q&A session. The presentation should already be uploaded on GN.com. And with that, I'm happy to hand over to Peter for some opening remarks.

Thank you, Rune, and thanks to all of you for joining us today. Let's start with some highlights on the quarter. Our enterprise business experienced strong growth in the U.S. and the APAC market, while EMEA continues to experience weak demand and some level of channel inventory reductions. We started shipment of our Wall Free range at the beginning of March and we have been very encouraged by what we have seen so far. During the quarter we experienced significant growth in the premium segments of headsets. This is exciting as we will be launching further additions to the Wall Free family later this year. that will gradually support our growth in enterprise. On the margin side, we have had a soft quarter as expected due to the annualization of tariffs and inventory provisions related to warehouse movement in the U.S. and certain channel investments to support the launch and rollout of the wall-free headset platform. In gaming, we continue to gain market share in a gaming equipment market influenced by continued weak consumer sentiment. While gaming also faced some of the same modern headwinds as enterprise due to tariffs, we have managed to control it through positive ASP development coming from the price increases implemented last year as well as a continued good cost control. We have just launched an exciting addition to our gaming headset portfolio, the Nova Pro Omni category, which is expected to contribute with growth for 26. In addition, we still have a strong product pipeline in the coming quarters and we look forward to even more exciting launches in 26. Moving to our hearing division, that now is treated as discontinued operations due to the announced divestment to Amplifon March 16. While we prepare for the closing of the transaction, the hearing division continues to perform well and in the quarter across regions and channels grew with the help of ReSound Vivia, driving continued market share gains, which led to an organic revenue growth of 9%. With this summary, let me provide you with some more details on the performance across our divisions. In enterprise, the business continues to do well in the U.S. and APAC, but due to the continued weak demand and some channel inventory reductions in media, we delivered a negative 5% growth in the quarter. The gross margin ended at 53.7% in the quarter, which was around 2% lower than last year due to the annualization of tariff costs, as well as some temporary effects due to an inventory provision related to the U.S. warehouse movement. We expect the gross margin to stabilize in the coming quarters. The division of profit margin reflects the development in gross margin, as well as some higher channel investment into the vol-free launch and rollout. The launch of Evolve Free has been very well received and it's progressing better than expected, driving significant growth in the premium segment of headset. This is encouraging and supports our growth ambitions for the year as we extend the Evolve Free family. Let's move to the next slide for a bit more detail on this. Within our premium health care category, where we have started the shipment of all three, 75 and 85 in March, we have experienced more than 50% growth year-over-year in Q1. This is to some extent driven by channel stocking of the new products, but the sell-through to resellers also show strength in the segment, which is an encouraging sign of momentum. The premium category accounts for around 15% of the enterprise revenue. Evolve 3 did contribute to growth in Q1, and we expect the effect from the launch to grow stronger over the year as we launch more products. In Q3, and in particular in Q4, we do expect to see a significant Evolve 3 contribution to absolute revenue and thereby also growth. As for the channel reductions we experienced in EMEA and Q1, we expect them to continue in the next few quarters given the current geopolitical uncertainty and the desire for several distributors to reduce inventories. To help you understand how we plan our year, we would like to tie all this together. As several of you know, we normally see a revenue seasonality between H1 and H2 of around 47% sales in H1 and 53% in H2. Due to the short-term channel reductions and the H2 benefit of the all-free rollout, the revenue seasonality will likely be more pronounced this year, which we have factored into our guidance. Let's move to the next slide and take some further look into the dynamics we observe in the markets we operate in. On this slide, we illustrate the different dynamics that have contributed to the top-line development in Q1. Our sell-out in North America and APAC continue to be very strong. This has also been supported by some market share gains, in particular in the US. The channel inventories are stable, both in North America and APAC, and for both regions, we delivered double-digit organic revenue growth in the quarter for our core enterprise business. Our main challenge for enterprises is EMEA, that is also the largest region. In EMEA, we are experiencing a weak market demand due to geopolitical uncertainty. We also lost some market shares in the region, which can be expected from time to time given our more than 60% market share position. The decline is mainly related to the entry-level price points of headsets where we have seen increased competition. We do expect to regain this share with the launch of Evolve Free when we launch these products relatively soon. Lastly, we have also seen some channel inventory reductions as our distributors navigate the global uncertainty. These effects together have resulted in a double-digit organic revenue decline at a quarter for EMEA. We do expect the challenge market conditions in EMEA to continue for the next few quarters. We focus on successfully upgrading our portfolio by rolling out the Wall Free, and we do expect this will stabilize our growth as the year progresses. Let's move to the next slide for some highlights and performance on the gaming division. In gaming, we delivered a negative 1% organic revenue growth in the quarter on top of a very demanding comparison base of 11% growth last year. This was driven by strong execution in a relatively soft market suppressed by continued muted consumer sentiment. The growth was supported by good momentum in the headset segment, while low-end keyboards and mice provided some growth headwinds. Region-wise, North America contributed positively, while the business was somewhat weaker in EMEA and APAC. The gross margin of 34% was negatively influenced by the annualization of tariff costs, as well as the wind-down effects in Q1 of the consumer business. This was partly offset by a positive ASP development coming from the price increases introduced last year. The division of profit margin developed positively to 11% compared to 10.4% in 2025, despite the negative development in gross margin reflecting a continued good cost control. Let's move to the next slide for some more information on the gaming launch. SteelSeries expands our premium category of gaming audio with the introduction of the Arctis Nova Pro Omni. This headset enhances overall experience for the modern gaming, providing the best circumstances for ultimate immersion with the best ANC in gaming and an AI noise rejection baked into the microphone for impressive background noise reduction. The ability to connect to five devices at once with real-time audio control and infinite battery life enables complete omnipresence, while the sound experience is enhanced further with a high-res wireless certification and custom high-res magnetic drivers. Coming in a new, refined, compelling design, this is a truly step up in a Nova Pro headset category. We're excited about this launch and do expect the Nova Pro Omni to meaningfully contribute to Steelsys' growth from Q2 and onwards. With these updates on the enterprise and gaming divisions, let's move to the next item on our agenda, where CERN will provide some more details on the hearing transaction.

Thank you, Peter. On March 16, we announced the divestment of our hearing division to Amplifon. Let me give you an update across key aspects of the transaction and its value creation. The carve-out process is well underway and we continue to expect the transaction to close towards the end of the year as previously communicated. The transaction proceeds comprise a cash payment and shares in Amplifon. The shares are subject to the customary lock-up period We are excited to create an industry-leading player with Amplifon by combining our strengths. We are convinced that this transaction will contribute with significant value creation for GN and Amplifon shareholders. While we do not see ourselves as a very long-term shareholder in Amplifon, given our new strategic direction, we will be patient and wait for the value to be realized before we responsibly, adding a controlled way, sell our shares. The carve-out will be taxable, and we expect an upfront tax payment of 1.5 to 2 billion Danish kroner. However, we will also get an equal-sized tax asset that can be used for tax reductions over the coming years. To unlock shareholder value, we are committed to return excess cash to our shareholders. We are currently in the short term targeting a leverage of 1 to 1.5 times EBITDA. Shortly after closing, we plan to initiate a share buyback program. To avoid any doubt, we also like to be clear that we are not planning to do any large-scale acquisitions. So the excess cash, the closing and additional cash when we exit our Amplifon shareholding is expected to be returned to our shareholders. Moreover, to address stranded costs and to set up GN for financial success, we are initiating cost initiatives to be executed during 26 that would deliver around 200 million Danish kroner in structural cost savings. To separate hearing and to adjust our cost base, we estimate total one-off cash cost of 750 million Danish kroner across 26 and 27, of which around 75% is expected this year. Related to the separation and to the setup of GN for the future, we have also in Q1 executed a number of non-cash impairments. On the next couple of slides, I'll provide you with some additional details around some of these initiatives driven by the transaction. Let me first start by framing the size of the initial cash we will have available for distribution. With the cash proceeds from the transaction, net of tax, we will have an excess cash position. On top of this, we will drive a healthy operating cash flow in 27, which will further add to the positive cash position. In order to reach a leverage target of 1 to 1.5 times by the end of 2027, this would imply quite meaningful excess cash holding somewhere between 3.5 and 4.5 billion, depending on the EBITDA of the business and the leverage target. As an overall planning assumption, you should expect the significant majority of this excess cash to be distributed back to our shareholders. As we mentioned, we are currently planning to initiate a share buyback program after closing of the transaction. Until the AGM in 2017, we are authorized by our shareholders to hold up to 10% treasury shares. We are currently holding 3.5% shares, so we can buy back around 6.5% shares, which equals to roughly 10 million shares. At the AGM in 2017, we will then propose a cancellation of any excess shares and ask for a new authorization, which would allow us to continue to significant shareholder distribution. In addition, we also expect to reinstate yearly dividends. In the years to come, we will also have a few attractive financial assets that can be sold over time, which could drive even more shareholder distribution. We hope that this framework will help you to understand our priorities. We will come back with more details about our capital allocation priorities at our upcoming Capital Markets Day, which will also allow us to discuss the framework with our investors. Slide 14. We are focused on driving GN towards sustainable, profitable growth. Let's talk about where we are and the steps we're taking in the near term. All margin numbers on this slide refer to the new GN without our hearing business. If we start with where we are coming from, in 2025, our restated EBITDA margin is 7.6%. which includes 200 million Danish kroner in stranded cost as part of the transaction. While we in 26 will have limited operating leverage due to the low growth from our challenged markets, we still expect to drive a margin expansion from cost focus and also from lower average tariff exposure than we had in 2025. We'll also benefit from some of the balance sheet adjustments which we announced today. This will in total lead us to an EBITDA margin of 8 to 9% for the year. The effect from the cost initiatives of around 200 million Danish kroner will further support our underlying marketage with around 2% in 2027. With the help of these steps, you will derive an underlying EBITDA margin of 10 to 11%. This margin level then serves as the structural margin level, which we will further improve in the years to come. We will share more of our plans around this at our upcoming Capital Market Day, which we plan for towards the end of the year. At this event, we will explain our plans for how to accelerate growth and drive margin expansions beyond where we are now, thanks to attractive markets, customer-centric innovation, selective investments and strong execution. Next slide, please. As a natural consequence of the transaction, we will be having some one-off costs related to the transaction. We estimate a total of one-off costs of 750 million DKK, of which 75% is expected to be incurred in 2026. The one-off costs comprise of costs directly related to the transaction, such as advisor, and consultant fees, legal costs, and the likes. To complete the carve-out, we will have costs for advisors, legal support, IT consultants, and costs related to contract separations. As we communicated today, we will also have costs for rightsizing of the business, which mainly will be severance costs. As for 2026 one-off cash costs, you should assume that most of these will be in the discontinued operations as these are costs necessary to drive the carport, while the right-sizing costs will be sitting in the continued operations. In total, this means that roughly 70% of the one-off cash costs in 2026 will be related to the discontinued operations. Finally, we have done some asset impairments across IT, RD and facilities. The majority of these is related to a large ERP project within our hearing division that is not part of the transaction parameter and we are therefore subject to an impairment to the asset. The impairments are non-cash by nature and is incurred in the first half of 2026. With that overview of the status and impact of the transaction, let's move to the group numbers and the related guidance. As a consequence of the transaction, our hearing division is now treated as discontinued operations. So from now on, we will focus on the performance of the continuing operations in GN, which comprise of our enterprise division, gaming division and group functions that are not part of the transaction perimeter. In Q1 of 26, the continuing business delivered organic revenue growth of minus 4% due to the challenge in the EMEA part of our enterprise division. The gross margin ended at 48.2%, reflecting gross margin development in enterprise, as Peter mentioned earlier. However, we do expect our more normal gross margin in enterprise already from Q2, and we would like to also see further improvements in gaming. The adjusted EBITDA ended at 6 million Danish kroner, equal to a margin of 0% compared to 6% in Q1 of 2025, driven by the development in the gross margin as well as negative operating leverage. The cash flow development in the quarter is including the discontinued operations. In Q1 of 26, GN delivered a free cash flow excluding M&A of negative 45 million Danish kroner, driven by seasonality but also offset by well-managed working capital. The net interest-bearing debt ended at 8.9 billion Danish kroner, corresponding to an adjusted leverage of 3.8 times EBITDA. Let's move to the next slide for our group financial guidance for the year. First, I would like to say that we are now reintroducing our guidance on EBITDA margin, which was suspended when we announced the divestment of the Hearing Division to Amplifon. As mentioned earlier, we are now guiding for a full year 26 adjusted EBITDA margin for continuing operations of 8-9%. The benefits of the 200 million cost savings would then come up top of this number and will be visible from 2027. Our guidance on organic revenue growth is a result of assumptions from our two divisions. The performance of our gaming business in Q1 has been fully in line with our plans for the year, while we are confirming our early applied assumptions, which were an organic revenue growth contribution of 7 to 13% for the gaming division. As Peter mentioned earlier, the demand in EMEA in enterprise has been weak in the first quarter, and we are now taking a more cautious perspective to the underlying market development in EMEA. Consequently, we are now assuming a modest declining global enterprise marketing for the year. However, due to the early feedback around EVOL3, we remain confident in our ability to drive market share gains for the year while we are assuming enterprise to contribute with organic revenue growth of minus three to plus three. As a function of the divisional assumptions across gaming and enterprise, we therefore are updating our organic revenue growth guidance to 0 to 6%. And with that, I'm happy to hand you back to Rune.