GN Store Nord A/S
Annual Financial Report

Q4 2022: Strong organic revenue growth of 14% in GN Hearing and -3% in GN Audio primarily driven by 9% in Enterprise

2022 Highlights

• GN delivered DKK 18.7 billion revenue with organic revenue growth of -3%
• Adj. EBITA of DKK 2.2 billion
• Intention to initiate a fully underwritten rights issue with gross proceeds of DKK 7 billion in order to accelerate deleveraging to 1-2x NIBD/EBITDA in the short-term

GN Hearing had a very strong finish to the year with 14% organic revenue growth in Q4 2022 driven by significant market share gains as a result of the successful ReSound OMNIA launch. Consequently, GN Hearing delivered 5% organic revenue growth in 2022, in line with the financial guidance. Revenue growth was 17% including around 7% impact from the development in foreign exchange rates and around 5% impact from M&A. The Emerging business (JabraEnhance.com) delivered 73% organic revenue growth. The revenue in 2022 reached DKK 6,227 million, compared to DKK 5,332 million in 2021.

GN Audio executed strongly in the Enterprise business in Q4 2022 with 9% organic revenue growth. Consequently in 2022, the Enterprise business matched the all-time high revenue from 2021 despite significant market challenges. The strong performance resulted in market share gains due to a world-leading product portfolio and solid channel execution. In spite of supply chain challenges and soft market conditions SteelSeries increased their revenues quarter by quarter, and ended with a strong finish, delivering organic revenue growth of -4% in Q4 2022, resulting in market share gains. The Consumer business was challenged by reduced consumer sentiment and significant promotions, which resulted in organic revenue growth of -37% for 2022. As a result, GN Audio delivered -7% organic revenue growth in 2022, in line with the updated financial guidance. The revenue in 2022 reached DKK 12,460 million, compared to DKK 10,443 million in 2021.

The acquisitions of Lively – now rebranded JabraEnhance.com – and SteelSeries are strategically important to GN Hearing and GN Audio, both doing very well in their market segments and present significant growth opportunities. The decision on how to fund the SteelSeries acquisition was taken in October 2021 under different macro-economic assumptions.

Multiple external factors presented GN with significant headwinds throughout 2022: War in Ukraine, soaring inflation, declining consumer confidence, looming recession. This came on top of continued COVID-19 market disturbances, supply chain challenges, FX headwinds, and very high freight costs.

In accordance with our announcement on November 11, 2022, GN has conducted a comprehensive review of the appropriate capital structure. In light of the macroeconomic environment and GN’s leverage, GN has announced that it intends to raise gross proceeds of DKK 7 billion in the first half of 2023 through the issuance of new shares with pre-emptive rights for GN’s shareholders (the “Rights Offering”).

Proceeds from the Rights Offering will be used to strengthen GN’s balance sheet and provide appropriate financial flexibility. With these actions we are confirming our commitment to the capital structure policy with a target of 1-2x NIBD/EBITDA, which we plan to reach in the short term.

GN has entered into a standby underwriting letter and, as such, the Rights Offering is, subject to certain customary conditions, fully underwritten by a syndicate of banks. In connection with the Annual General Meeting on March 15, 2023, GN’s Board of Directors plan to seek authorization to increase the share capital with pre-emptive rights for the existing shareholders.

Financial highlights Q4 2022  

• GN Store Nord delivered revenue of DKK 5.3 billion in Q4 2022 and an organic revenue growth of 3%. Adj. EBITA was DKK 744 million, equal to a growth of 14% compared to Q4 2021
• GN Hearing delivered a very strong 14% organic revenue growth in Q4 2022 driven by significant market share gains as a result of the successful ReSound OMNIA launch. Adj. EBITA was DKK 503 million in the core business, equal to an EBITA margin of 28.9%, reflecting strong operating leverage. The Emerging business delivered an EBITA of DKK -31 million
• GN Audio delivered -3% organic revenue growth in Q4 2022 driven by 9% organic revenue growth in Enterprise but offset by -38% organic revenue growth in Consumer. SteelSeries delivered a strong finish to the year leading to an organic growth of -4% in Q4 2022 in a soft market. Adj. EBITA ended at DKK 334 million in Q4 2022

Financial highlights Q4 2022

* Including “Other”
** Excluding non-recurring items (DKK -152 million in OPEX in GN Audio, DKK -11 million in COGS in GN Hearing and DKK -25 million in OPEX in GN Hearing) in 2022. Excluding non-recurring items (DKK -31 million in OPEX in GN Audio) in 2021
*** Excluding non-recurring items (DKK -188 million in 2022 and DKK -31 million in 2021) and amortization of acquired intangible assets

Financial highlights 2022

* Including “Other”
** Excluding non-recurring items (DKK -196 million in COGS in GN Audio, DKK -264 million in OPEX in GN Audio, DKK -56 million in COGS in GN Hearing and DKK -90 million in OPEX in GN Hearing) in 2022. Excluding non-recurring items (DKK -45 in OPEX in GN Audio) in 2021
*** Excluding non-recurring items (DKK -624 million in 2022 and DKK -45 million in 2021) and amortization of acquired intangible assets

Shareholder returns – dividend and share buybacks
In 2022, GN distributed DKK 214 million to shareholders (equivalent to DKK 1.55 per share) in respect of the fiscal year 2021, as approved at the Annual General Meeting in 2022. Due to the acquisition of SteelSeries, as announced in October 2021, GN Store Nord’s share buyback program has been paused for the time being.

As a consequence of the concluded capital structure review, GN will not pay a dividend in respect of the fiscal year 2022. As GN’s capital structure policy is confirmed, GN expects to return to making dividend payments, once the leverage is back within the long-term target.

Financial guidance for 2023

GN Hearing

In 2023, GN Hearing expects to continue to grow faster than the projected market growth. Due to the current macroeconomic environment, GN Hearing is projecting 1-3% market volume growth and -1% to -2% market ASP decline. It is currently expected that market growth will be higher in H2 2023 compared to H1 2023. Due to GN Hearing’s current momentum and competitive product portfolio, an organic revenue growth between 2% to 8% driven by market share gains is expected for 2023.

Non-recurring items primarily relates to investments in the supply chain in the magnitude of DKK ~ -150 million is expected in 2023 in order to restore profitability. For the core hearing aid business, the EBITA margin is expected to be between 13% to 16% for 2023 excluding non-recurring items. In the Emerging Business (including JabraEnhance.com (formerly Lively) and further investments into the digital space), GN Hearing will continue to invest, and with the expected strong topline growth, the EBITA impact for 2023 is expected to be DKK ~ -150 million.

The GN Hearing financial guidance is based on the following assumptions for Q1 2023:

• Revenue: Q1 2023 organic revenue growth is assumed to be within the 2-8% guidance
• EBITA: Q1 2023 EBITA margin assumed to be mid-single digit (excluding non-recurring items) due to seasonality and launch costs. The EBITA margin is expected to improve in H2 2023 due to operating leverage

GN Audio

In 2023, GN Audio expects to continue to grow faster than the market. The uncertainties arising from the current macroeconomic environment are expected to negatively impact the market growth. GN Audio is expecting organic revenue growth between -10% to +5%. The EBITA margin is expected to be 10% to 15% for 2023 excluding non-recurring items. This reflects an expectation of gaining market share in a challenging market environment and continued cost prudence.

In order to further reduce the cost base GN Audio is expecting non-recurring items of
DKK ~ -150 million in 2023 in relation to cost reduction measures.

The GN Audio financial guidance is based on the following assumptions for Q1 2023:

• Revenue: Q1 2023 organic revenue growth is assumed to be negative, due to challenged market conditions
• EBITA: Q1 2023 EBITA margin assumed to be mid-single digit (excluding non-recurring items) due to the topline development and investment in growth opportunities. The EBITA margin is expected to improve in H2 2023 due to improvement in operating leverage

GN Store Nord

For full year 2023, GN Store Nord consequently expects organic revenue growth of -6% to +6% in 2023, while EBITA in “Other” is expected to be DKK ~ -200 million.

Financial guidance 2023

Note 1) Emerging Business mainly includes the JabraEnhance.com (formerly Lively)
Note 2) Excluding non-recurring items
Based on foreign exchange rates as of February 9, 2023

Primary risk factors in relation to the financial guidance

The basic assumptions behind the guidance remain more uncertain than normal. Primary risk factors include inflationary pressures, consumer sentiment and general economic uncertainty. GN’s supply chains, including component sourcing and local and geopolitical instability and deteriorating trade relations may impact key suppliers and GN’s operations.

Quotes from Executive Management
Gitte Aabo, CEO of GN Hearing, comments: “We are very pleased with delivering 14% organic growth in Q4 and taking share in soft hearing aid markets. Our new flagship platform ReSound OMNIA has exceeded our high expectations and we are thrilled that customer reception and initial sales numbers have been very strong. GN Hearing’s new ReSound OMNIA product family is available in a full line-up of popular styles to cater to all hearing needs and preferences. In addition to the Receiver-in-Ear hardware launched in August 2022, the family now includes miniRIE, Behind-the-Ear (BTE) and custom-made styles all benefiting from 150% improvement in hearing in noisy environments, which puts us in a very strong competitive position going into 2023.”

Peter Karlstromer, CEO of GN Audio, comments: “I’m very pleased to take over from René Svendsen-Tune after his successful 8 years. GN Audio is innovative, well run, and I am confident in our team’s ability to execute strongly. In 2023, we will continue to launch new industry leading products, making us strongly positioned to continue to delight customers and gain market share in a difficult environment.”

Peter la Cour Gormsen, CFO of GN Store Nord, comments: “2022 was a challenging year with significant external headwinds. Still, GN took market shares across business segments and delivered revenue of DKK 18.7 billion and adj. EBITA of DKK 2.2 billion.”

Teleconference
GN Store Nord will host a teleconference at 11.00 a.m. CET today. 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
Anne Sofie Staunsbæk Veyhe +45 45 75 85 06
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 expectation 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, 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).

The securities offered will not be and have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements

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

About GN

GN facilitates communication between people through intelligent hearing, audio, video, and gaming technology. Inspired by people and driven by our passion for innovation, we leverage technologies to deliver unique user experiences that bring people closer through the power of sound and vision.

GN was founded more than 150 years ago with a vision to connect the world. Today, we proudly honor that legacy with our world-leading expertise in the human ear, audio, video and speech, wireless technologies, software, miniaturization, and collaboration with leading technology partners. GN's solutions are marketed by the brands ReSound, SteelSeries, Jabra, Beltone, Interton, BlueParrott, Danavox and FalCom in 100 countries. Founded in 1869, the GN Group employs 8,000 people and is listed on Nasdaq Copenhagen (GN.CO).

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

Attachments

• GN Annual Report 2022
• GNStoreNord-2022-12-31