Gn Store Nord A/S Adr

Hello everyone and welcome to GN's conference call in relation to a Q2 report announced yesterday evening. Participating in today's call is Group CEO Peter Karlstromer, Group CFO Soren Jelert and myself, Rune Sandager, Head of Investor Relations. The presentation is expected to last around 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. Before going into the business performance during the quarter, I would like to spend a few minutes on the development around the hearing transaction and the hearing business. To remind everyone, we took the decision in March to sell our hearing business to Amplifon to create a global lead on hearing care. The carve-out process is well underway and closing of the sale to Amplifon remains expected towards the end of this year. Let me also remind you about a few items that we shared in connection with our Q1 report in May. The proceeds of the transaction are 12.6 billion Danish kronor in cash and 56 million Amplifon shares. As part of the process, we will make a carve-out of our continuing activities, which will be taxable. We estimate this upfront tax payment to be between 1.5 to 2 billion Danish kronor. However, we will also get an equal-sized tax asset that we can use for tax reductions in the coming years. The estimated total one-off cash cost related to the transaction is 750 million Danish kroner. This includes transaction costs, carve-out costs and rightsizing costs for the continuing GN. We announced in Q1 a cost reduction program that will reduce the running cost of the continuing year of around 200 million Danish kronor compared to the realized level in 26. These cost actions have now been executed during the second quarter and will positively impact our margins in 27 and beyond. As for the proceed and capital allocation going forward, we are targeting a leverage between one and one and a half times in the short term. We are not planning to do any major acquisitions. The excess cash will be distributed through share buybacks and dividends in the best ways for our shareholders. These shareholder distributions will begin as fast as practically possible after the closing of the transaction. Let's now move to the next slide and our latest hearing aid we have launched. We have just launched ReSound Sensia, which is the world's smallest AI hearing aid powered by a new AI platform that adjusts automatically to the listening environment with unmatched efficiency. The product is built around three core technological strengths. The Acoustis IQ technology that delivers the most accurate real-time sound sensing. The narrowest four microphone beamforming deliver even better speech clarity and noise. and the best automatic DNN denoising that lifts conversation in shallow listening environments with less effort. Sensia further strengthens the e-inherence portfolio and will help our patients to hear even better in noisy environments, which we continue to believe is the most important area to innovate around. We have made these great improvements while keeping the small appreciated form factor and a full day battery life. The new family of products will be launching in the US, Germany and Austria as of today, with more markets to follow in the coming months. While it's early days, our initial customer interactions, actual pre-orders, as well as the number of customers signed up for sales events during the coming periods are looking very encouraging. With that, let us turn to the group and division highlights for the continuing business in the second quarter. Let me summarize the key highlights for enterprise and gaming in the second quarter. In summary, we are building momentum, setting us up for growth and modern expansion in the second half of the year. In enterprise, we continue to see healthy growth in North America and APAC. In EMEA, we saw continued decline, but importantly, with signs of improvements compared to the first quarter. Total organic revenue growth came in at negative 7%. with the demand and comparison base in Falcon being a significant factor. Excluding Falcon, the organic growth was negative 3%. The Evolve Free platform continues to resonate strongly with customers. We saw double digit sellout growth in the premium headsets and well into double digit, demonstrating that the products are in strong demand among customers. We also saw a healthy improvement of our gross margins in the quarter while we executed channel investment to support the launch of further wall-free. As already announced in July, more products are coming now in the second half of the year. In gaming, we delivered 5% organic revenue growth despite continued muted consumer sentiment supported by headset market share gains driven by Nova Pro Omni. Margin progression was strong in the quarter, driven by pricing discipline, success of new products, a lower tariff level, and a minor provision release. Looking ahead to the second half, we see significant growth opportunities supported by the upcoming mice and keyboard launches and continued headset momentum. Let's move to the next slide with a bit of further detail on enterprise. In the second quarter, Enterprise delivered organic revenue growth of negative 7% in total or negative 3% if we exclude Falco. On a regional basis, we continue to see strong growth in North America and APAC. In EMEA, we saw a decline but with signs of improvements compared to the first quarter, driven by the positive reception of Evolve Free and a gradually improving EMEA market. Within the product portfolio, the headset business showed improving development and the meeting room and frontline workers segment delivered both healthy growth. Falcom advanced its project pipeline but with limited revenue contribution as expected in the quarter. On the financial side, gross profits were 891 million Danish kronor, translating into a gross margin of 57.2% compared to 56.1% in the second quarter of 2025. Division of profit was 483 million Danish kronor, translating into division of profit margin of 31% compared to 34% in second quarter of 2025. The year-on-year development reflects the channel investments we are making to prepare for further Evolve Free launches in the second half. Overall, enterprise continues to progress in line with our plans. Let's move to the Evolve Free portfolio on slide 9. On the 1st of July we announced three important additions to the Evolve Free portfolio. The Evolve Free 65 Flex, 65 and 45. The Evolve Free 85 and 75 were launched in March 26 and have already demonstrated strong commercial traction with solid double-digit seller growth in the premium Bluetooth category, which I will return to in a bit more detail. The next wave of the portfolio, the Wall Free 65, 65 Flex and 45 is planned for launch in September 26. This launch is significant to us and addresses 35% of our enterprise business. That means that we together with the Wall Free 85 and 75 will address 50% of the enterprise business with a fully refreshed portfolio that is set up for growth. The Evolve 365 Flex is tailored for users who move between locations. It comes without a boom arm, in a small form factor, with better outer voice pickup and a wind-adaptable ANC, designed for professionals who need performance on the go in a very compelling small form factor. The Evolve 365 brings the core Evolve Free experience into the mid-tier segment. With better sound, a four-microphone adaptive ANC system, a very strong product for everyday modern work. The Evolve 345 takes the concept into the entry-level segment. It is the lightest model in the portfolio, with best-in-class office voice pickup and ANC, making it ideal for large-scale deployments and frontline workers where price is key, but voice performance still cannot be compromised. With the addition of these three products, Evolve Free is no longer a premium-only offering. It is a portfolio spanning from premium to entry-level, with more products still to come. This portfolio expansion sets a stage for returning to growth in the second half of 26. Let us look at the recent financial performance driven by Evolve Free products. As we mentioned in Q1, our premium Bluetooth category is roughly 15% of total enterprise. In this category, we experienced a very strong selling growth during Q1, driven by the initial stocking effects of Evolve Free. Now, a quarter later, it is encouraging to see that we are also seeing solid double-digit sell-out growth in the category, which underpinned the strong customer reception of the flagship products. On top of the strong sell-out, we have continued to see a very strong selling growth in Q2 as well. Taking it together, on the right side of the slide showing the conceptual revenue build-up of our headset segment. In the first half of this year, we have seen strong growth in North America and APAC, but continued weakness and channel reductions in EMEA. That has weighed on the top line due to EMEA being the major revenue contributor. While there are still some uncertainties around channel inventories, we expect this effect to be smaller in the second half of the year. Also, as we move into the second half, we will begin to see the new free products starting to ramp up as well. This means that a larger part of our headset segment will be supported by new products. These effects together set us up for a healthy second half with significant revenue generation and profitability improvements. This year we expect a bit of unusual seasonality driven by the strong set of launches we have which is in line with what we also shared in our Q1 results. Let's move to the next slide and talk about gaming. In the second quarter gaming delivered revenue of 613 million Danish kronor corresponding to 5% organic revenue growth in a market held back by muted consumer confidence. We saw strong growth and market share gains in headsets and keyboards, while mice had a more difficult quarter, predominantly due to an aging product portfolio. Regionally, North America continued to grow well, whereas EMEA and APEC were more challenged due to the market conditions. Gross margins came in at 39.2% compared to 34% last year, driven by pricing discipline, success of new products, and a minor provision release. Division of profit margin ended at 15% compared to 12.2% last year, driven by continual cost focus combined with some of the target channeled investments we do to support growth opportunities in the second half of this year. Let's move to the next slide. This highlights a milestone we are very proud of. SteelSeries is now the number one brand globally in gaming headsets. This is the result of a consistent and relentless innovation over many years. Looking at our market share development from 2017 to today, the trajectory is clear. Each product generation has expanded our position. From the original Arctis headset line, through the Arctis 9, Arctis 7 Plus, Arctis Nova Pro, The Game Buds, The Nova Elite and now the Arctis Nova Pro Omni. The Arctis Nova Pro Omni has received outstanding reviews from leading gaming media including IGN, T3, GamesRadar and PC Gamer. Descriptions like the best headset on the market and the most well-rounded gaming headsets available speak to the quality and product differentiation we have achieved. This market leadership position gives us a strong commercial foundation as we head into the second half of the year, where we expect continued headset momentum combined with a contribution from new launches across mice and keyboards. That concludes the deep dive into our divisions. Let me now hand over to Soren for the group financials and guidance.

Thank you, Peter. Let's have a look at the group financials for the second quarter. In the quarter, GN's continuing operations delivered organic revenue growth of minus 4%. As expected, the gross margin improved strongly following the temporary weak gross margin in quarter one. Adjusted EBITDA ended at 110 million DKK, corresponding to an adjusted EBITDA margin of 5%. The development reflected targeted investments to support growth in the second half of 26. Total incurred one-off costs in the quarter were 74 million DKK, all of them cash costs mainly related to the carve-out of the hearing and preparations for the new GN structure. Free cash flow, excluding M&A, ended at minus 616 million DKK, reflecting insourcing of activities in the supply chain driven a temporary increase in working capital, which is expected to normalize during the rest of the year. This insourcing is related to our distribution of products across enterprise and gaming. Net interest bearing debt ended at 9.6 billion DKK, but let me just remind you that the coming proceeds from the transaction will resolve in a net positive cash position at closing. With that, let us move to the financial guidance for 26 on slide 15. Our group-wide financial performance in the second quarter has been in line with the assumptions put out in May. We are seeing the underlying improvements in our growth development and at the same time a strong development on our EBITDA margin, which improved strongly compared to first quarter. As we communicated yesterday evening, we are upgrading our margin outlook for the year and narrowing the revenue assumptions. We have had a healthy development of our gross margins in Q2 and feel good about the trajectory for the year. OPEX-wise, we are making growth-related investments as we planned. This, together with an assumption of 100 to 150 million Danish kroner of tariff refunds, led us to upgrade our adjusted EBITDA margin guidance for the year. Revenue wise, we will be within our initial guidance, but given the continued muted market development as well as some earlier upside scenarios that is not deemed realistic, we are narrowing the range towards the lower half of our earlier guidance. In summary, we are making healthy progress for the year and encouragingly are set up to finish the year in a good second half momentum, which will carry with us into 27. Let's look at the margin expectations for the second half of the year in a slightly more illustrative form. The traditional seasonality in gaming as well as successful in World 3 rollout will be a key turning point for the revenue development and thereby growth aspects in the second half of the year. As we have mentioned throughout the year, we have assumed the year to be slightly more back-end loaded than normal. This also impacts our sequential growth outlook, but we remain convinced that Q3 will be a turning point with a return to positive group organic revenue growth, and then likely improving sequentially into Q4 when we have a full quarter of launch products. As mentioned earlier, gross margin improved strongly in Q2 and was mainly driven by underlying improvements. We are therefore assuming that these current levels should continue into the second half on roughly the same strong levels. On top of this, you will of course see the impact from the expected tariff refunds We have a good control on OPEX, and while there might be quarterly fluctuations, you should expect more operating leverage as we are progressing during the rest of the year. When you combine these elements – revenue seasonality, gross margin improvements, tariff refunds and a fairly stable OPEX – the path to the full-year margin guidance of 9 to 10 is clear. In addition, the structural cost initiatives executed in the second quarter will significantly further improve our margins expansion for 2027. And with that, I'm handing you back to Rune.