Interim Report Q3 2024: Further margin expansion and strong cash flow despite mixed growth across divisions

Highlights

• The Hearing division continued to gain significant market share leading to 10% organic revenue growth, while the divisional profit margin increased by 5.9 percentage points to 34.8%
• The Enterprise division was negatively impacted by sell-in pressure due to economic growth challenges in parts of Central Europe, while North America and Rest of World continued its stabilization. Overall, organic revenue growth ended at -7%, while sell-out growth was -3%. Despite the topline development, the company-wide synergies led to a divisional profit margin of 33.8%
• The Gaming & Consumer division executed strongly on the wind-down of the Elite & Talk product lines, while SteelSeries was impacted by a slightly declining market, and some quarterly fluctuations including delays in certain order deliveries. The divisional profit margin ended at 4.0% (including DKK -23 million in extraordinary cost) reflecting significant promotional efforts to wind-down product lines
• The reported EBITA increased 29% to DKK 553 million, driven by group-wide synergies of DKK ~115 million and strict cost focus, but partly off-set by negative operating leverage in Enterprise, the significant promotional efforts in Consumer and DKK -23 million in extraordinary costs. This led to an EBITA margin of 13.3%, equal to a margin expansion of 3.6 percentage points
• Free cash flow excl. M&A ended at DKK 786 million (free cash flow incl. M&A was DKK 892 million) driven by the solid earnings and a positive impact from working capital. Net interest-bearing debt decreased to DKK 9.7 billion, equal to adj. leverage of 3.5x
• GN has throughout the year increased its earnings power and cash flow generation, leading to an upgrade of the guidance on free cash flow excl. M&A to "DKK >1,100 million” and a confirmation of the EBITA margin guidance of "12 to 13%”. Following a somewhat softer market development than earlier anticipated for Enterprise and Gaming, GN adjusts its organic revenue growth guidance to "1% to 2%”

Financial guidance for 2024

	Organic revenue growth	Reported EBITA margin	Free cash flow excl. M&A (DKK million)
GN Store Nord	1% to 2%	12% to 13%	>1,100

Key assumptions for financial guidance 2024

Hearing division
Following very strong market growth in 2023, GN expects the markets to return to historical growth rates in 2024 supported by ongoing favorable demographic trends. As such, GN projects 4-6% market volume growth and -1% to -2% market ASP decline. Driven by the strong continued momentum and market share gains with ReSound Nexia, GN expects the Hearing division to trend towards the upper half of the original organic growth assumption of 8% to 12%. As a function of the strong growth, the Hearing division is projecting an EBITA margin in the core hearing aid business of around 20% for 2024.

Enterprise division
The market stabilization observed in the first half of 2024 has continued into H2 2024 in North America and Rest of World. However, parts of Central Europe have experienced some sell-in pressure due to economic growth challenges. As a result of this, the Enterprise division is currently assuming an overall organic revenue growth of around -3% for 2024 compared to the original assumption of -3% to +5%. The long-term attractiveness of the market is fully intact, why it is currently the planning assumption that the addressable Enterprise market will continue to improve in 2025, which is supported by the current trend in sell-out data.

Gaming & Consumer division
Following the gradual wind-down of the Elite and Talk product lines the Gaming & Consumer division is assumed to deliver organic revenue growth of -10% to -2% reflecting the announcement on June 11, 2024. This reflects around DKK 450 million lower revenue in Consumer compared to 2023, as well as an assumption that Gaming is currently trending towards the middle of the original +2% to +10% organic growth assumption due to some recent market softness. As a result of the gradual wind-down the group will incur extraordinary costs of around DKK -200 million in 2024, including severance payments, write-down of prior development projects and inventories, of which the majority is expected to be non-cash.

Quotes from Executive Management
Peter Karlstromer, CEO of GN Store Nord, comments: "As a result of the continued execution of our transformation to unfold the full value of GN’s potential, we significantly increased our margins and generated strong cash flow of DKK 800 million. Our Hearing division continued to perform very well with market share gains and solid growth. Our Enterprise division faced headwinds from challenged markets in major European countries, while the U.S. and Rest of World saw recovering enterprise markets. Our Gaming business had a difficult quarter, but we remain confident that the business will be back in growth mode in Q4. Overall, I am pleased with the progress we are making with creating a stronger GN and preparing us for future growth.”

Financial overview Q3 2024

	GN Store Nord			Hearing division			Enterprise division			Gaming & Consumer division
DKK million	Q3 2024	Q3 2023	Growth	Q3 2024	Q3 2023	Growth	Q3 2024	Q3 2023	Growth	Q3 2024	Q3 2023	Growth
Revenue	4,164	4,443	-6%	1,725	1,653	4%	1,680	1,838	-9%	759	952	-20%
Organic growth	-4%	0%		10%	15%		-7%	-13%		-20%	3%
Gross profit	2,283	2,224	3%	1,103	1,019	8%	927	976	-5%	253	229	10%
Gross profit margin	54.8%	50.1%	4.7%p	64.0%	61.6%	2.4%p	55.2%	53.1%	2.1%p	33.3%	24.1%	9.2%p
Divisional profit	1,198	1,133	6%	600	477	26%	568	635	-11%	30	21	43%
Divisional profit margin	28.8%	25.5%	3.3%p	34.8%	28.9%	5.9%p	33.8%	34.5%	-0.7%p	4.0%	2.2%	1.8%p
EBITA	553	430	29%
EBITA margin	13.3%	9.7%	3.6%p
Free cash flow excl. M&A	786	279	507

Teleconference
GN Store Nord will host a teleconference at 11.00 a.m. CET on November 7, 2024. Please visit www.gn.com/investor to access the teleconference. Presentation material will be available on the website prior to the start of the teleconference.

For further information, please contact:

Investor Relations
Rune Sandager +45 45 75 92 57


Media Relations
Steen Frentz Laursen +45 20 65 34 20

Forward-looking statements
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. Changes to such expectations and assumptions will not be disclosed on an ongoing basis, unless required pursuant to general disclosure obligations to which GN is subject.

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 as well as foreign exchange rates, 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).

For more information, please see the "Management's report" and "Risk management” sections in the Annual Report. This Report should not be considered an offer to sell securities in GN.

About GN
GN brings people closer through our leading intelligent hearing, audio, video, and gaming solutions. Inspired by people and driven by innovation, we deliver technologies that enhance the senses of hearing and sight. We help people with hearing loss overcome real-life challenges, improve communication and collaboration for businesses, and provide great experiences for audio and gaming enthusiasts. GN was founded more than 150 years ago with a vision to connect the world. Today, inspired by our strong heritage, GN touches more lives than ever with our unique expertise and the broadest portfolio of products and services in our history – bringing people closer to what is important to them.

We market our solutions with the brands Jabra, ReSound, SteelSeries, Beltone, Interton, BlueParrott, Danavox, and FalCom in 100 countries. Founded in 1869, GN Group employs more than 7,000 people and is listed on Nasdaq Copenhagen (GN.CO).

Visit our homepage GN.com and connect with us on LinkedIn, Facebook and X.

Attachment

• GN Interim Report Q3 2024