Q2 2022 GN Interim Report

GN Store Nord A/S / Key word(s): Semi-annual report
GN Store Nord A/S: GN Q2 2022 Interim Report

August 17, 2022 / 8:55 PM CET/CEST
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The issuer is solely responsible for the content of this announcement.

Q2 2022 Interim Report: GN Store Nord in Q2 2022 reported 29% revenue growth, including 8% organic growth, driven by strong business and audience performance. The global supply chain situation is improving but remains challenging. Revised forecasts to reflect consumer sentiment: SteelSeries forecast cut significantly; reduction in GN Audio’s organic revenue growth forecast due to consumer business climate; GN Hearing confirming lower end of guidance range

– – GN Store North

  • In the second quarter of 2022, GN recorded revenue growth of 29%, including 8% organic growth, generating revenue of DKK 4,857 million. A strong improvement of DKK 1 billion compared to Q1 2022

  • Global supply chain situation improving, but still challenging

  • Adj. EBITA was DKK 610 million and free cash flow excl. Mergers and acquisitions reached -412 million DKK thanks to net working capital and investments in growth opportunities

  • Adj. Leverage ended at 5.7x, reflecting M&A activity and earnings profile timing effects

  • On August 17, GN signed mandate documents with its commercial banking group for a loan of €520 million over three years to cover its short-term financing needs.

– – Audience GN

  • GN Hearing reported 16% revenue growth in the second quarter of 2022, including 4% organic growth. Growth was driven by strong performance in Europe, while being negatively impacted by COVID-19 related restrictions in China and consumer sentiment in the US. Adj. EBITA margin was 6.6% in the core business, driven by higher freight and material costs, investments in launch activities and FX development

  • The Emerging business, primarily Lively, delivered another strong quarter with organic revenue growth of 79%. EBITA was -49 million DKK

  • Free cash flow off. Mergers and acquisitions reached -326 million DKK, due to lower level of reported profits and investments in growth opportunities

  • ReSound OMNIA, announced August 16, addresses the number one hearing aid challenge: hearing speech in noise. ReSound OMNIA delivers 150% improvement in speech understanding in noisy environments

  • Our first custom rechargeable hearing aids, “Custom made by ReSound”, launched in June 2022

  • Financial guidance confirmed for the bottom of the guidance range

– – GN Audio

  • GN Audio delivered 36% revenue growth in the second quarter of 2022, including 10% organic growth, driven by 18% organic revenue growth in the B2B Enterprise segment despite the constraints of a chain situation. Improving but difficult global supply. Growth was negatively impacted by -25% organic revenue growth in the Consumer business, which now represents less than 20% of GN Audio’s organic revenue.

  • SteelSeries reported organic revenue growth of -30% while gaining market share in a sharply declining market impacted by a challenging supply chain and declining consumer confidence

  • Adj. EBITA margin was 18.0%, reflecting investments in growth opportunities, higher freight and material costs, FX expansion and SteelSeries consolidation

  • Free cash flow off. Mergers and acquisitions amounted to DKK 49 million, reflecting strong execution in a challenging environment, but offset by the build-up of critical component inventories and trade receivables

  • Revised financial forecast to reflect consumer sentiment: SteelSeries organic revenue forecast significantly reduced; reduction in GN Audio’s organic revenue growth forecast due to consumer business climate; and revision of the adj. GN Audio EBITA margin mainly due to FX

Senior Management Quotes

Gitte Aabo, CEO of GN Hearing, comments: “In the second quarter, GN Hearing delivered solid revenue growth despite weak market conditions in the United States and COVID-19 related restrictions in China. Our innovative R&D engine is firing on all cylinders with five exciting products launched this year, the most recent being ReSound OMNIA which delivers an outstanding 150% improvement in speech understanding in noise. GN Hearing now offers a portfolio of new and very robust solutions that meet the diverse needs, experiences and desires of people with their hearing difficulties.

René Svendsen-Tune, CEO of GN Audio, comments: “GN Audio delivered strong growth in the B2B Enterprise business on top of last year’s very high comparable base, thanks to strong execution from our dedicated teams around the world. At the moment we are seeing an easing in the component situation, but we are still constrained and supply continues to lag behind demand. Consumer confidence is low, which is impacting the markets in which our Consumer and SteelSeries businesses operate, but demand for our Enterprise products remains very strong.

Financial overview Q2 2022

GN North Store*

GN Audience

GN-Audio

million danish kroner

Core business

Emerging company

GN Audience

GN Audio Organic

SteelSeries

GN-Audio

Revenue

4,857

1,488

41

1,529

2,841

487

3,328

Organic growth

8%

4%

79%

4%

ten%

-30%

ten%

Adj. RBE**

610

98

-49

49

600

Adj. EBITA margin**

12.6%

6.6%

3.2%

18.0%

* Including Other, ** Excluding non-recurring items (DKK -54 million DKK in COGS in GN Audio, DKK -14 million in OPEX in GN Audio, DKK -16 million in COGS in GN Hearing and DKK -27 million in OPEX in GN Audience)

Financial guidelines 2022

Revised forecasts to reflect consumer sentiment: SteelSeries forecast cut significantly; reduction in GN Audio’s organic revenue growth forecast due to consumer business climate; review of GN Audio adj. EBITA margin mainly driven by currency; GN Hearing confirming the lower end of the guidance range. Therefore, GN Store Nord now expects growth in adj. EPS between -10% and 0%

Financial orientation 2022 (previous)

Organic revenue growth

Adjusted EBITA margin4)

Non-recurring items (million DKK) 5)

Become thin
Adjusted EPS6)

GN Audience

– Organic core business

5-10%

~14%

~ -150

– Emerging company1) (millions of Danish kroner)

~ -190

GN-Audio2) 3)

~20%

~ -400

– Organic GN Audio

>5%

-Steel Series

>10%

Others (million DKK)

~ -190

GN Store North

>10%

Financial guidelines 2022 (updated to August 17)

Organic revenue growth

Adjusted EBITA margin3)

Non-recurring items (million DKK) 4)

Become thin
Adjusted EPS5)

GN Audience

– Organic core business

5-8%

~14%

~ -150

– Emerging company1) 8) (millions of Danish kroner)

~ -200

GN-Audio2) 8)

17-18%

~ -400

– Organic GN Audio6)

0-5%

-Steel Seriesseven)

>-25%

Others (million DKK)

~ -190

GN Store North

-10% to 0%

Note 1) Emerging Business mainly includes the acquisition of Lively

Note 2) SteelSeries organic revenue growth will be considered M&A growth for GN Audio

Note 3) Excluding non-recurring items

Note 4) Non-recurring items at GN Hearing mainly related to supply chain investments (DKK ~ -150m) and at GN Audio related to transaction and integration costs (DKK ~ -200m) as well as Non-cash PPPs (DKK ~-200m), associated with SteelSeries

Note 5) Compared to 2021 Adjusted EPS (excluding non-recurring items and amortization and impairment of acquired intangibles) of DKK 15.29

Note 6) The growth assumption for the Enterprise business, which accounts for more than 80% of GN Audio’s organic business, is unchanged and the Enterprise business is still expected to see double-digit growth in H2 2022. The market in which the Consumer business operates is now expected to decline by approximately 25% in 2022 due to declining consumer confidence, resulting in a material negative growth assumption for the GN Audio Consumer business in 2022

Note 7) The addressable gaming equipment market is now expected to decline by around 25% in 2022 to reflect consumer sentiment

Note 8) Reflecting updated currency assumptions for 2022 following the significant appreciation of the USD

Financial guidance based on exchange rates as of August 17, 2022

Teleconference

GN Store Nord will host a conference call at 11:00 a.m. CEST on August 18. Please visit www.gn.com/investor to access the conference call. Presentation material will be available on the website prior to the start of the call.

For more information, please contact:

Investors and analysts

Henrietta Wennicke

Vice President – ​​Investor Relations and Treasury

Tel: +45 45 75 03 33

Where

Runic Sander

Director – Investor Relations and Treasury

Tel: +45 45 75 92 57

Press and media
Steen Frentz Laursen
Vice President, Corporate Communications
Tel: +45 20 65 34 20

About LARP

GN makes it easy for people to communicate through smart hearing, audio, video and gaming technology. Inspired by people and driven by our passion for innovation, we leverage technology to deliver user experiences that bring people together through the power of sound and vision.

GN was founded over 150 years ago with a vision to connect the world. Today, we proudly honor that legacy with our cutting-edge expertise in the human ear, audio, video and speech, wireless technologies, software, miniaturization and collaboration with leading technology partners. GN solutions are marketed by ReSound, SteelSeries, Jabra, Beltone, Interton, BlueParrott, Danavox and FalCom brands in 100 countries. Founded in 1869, the GN Group employs over 7,000 people and is listed on Nasdaq Copenhagen (GN.CO).

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

August 17, 2022 CET/CEST DGAP distribution services include regulatory announcements, financial/corporate news and press releases.
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