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Jefferies London Healthcare ConferenceMarcus Desimoni – CFO, GN Store Nord & GN Hearing, November 2019
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Safe Harbor Statement
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.
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).
This presentation should not be considered an offer to sell or buy securities in GN Store Nord.
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The GN Group at a glance – unique portfolio of medical, professional and
consumer audio solutions
GN Hearing GN Audio
Source: Company information
Note: Financials refer to FY 2018
(1) Includes Group Shared Services
… a world class organisation
Sales
(% of total)
DKK 5,833m
(55%)DKK 4,774m
(45%)
EBITA
(margin)DKK 1,194m
(20.5%)
DKK 905m
(19.0%)
Innovation leader creating best-in-class
hearing aid technologyLeading position in growing CC&O market
Sales
(% of total)
EBITA
(margin)
Sales: DKK 10,607m. EBITA(1): DKK
1,956m (margin: 18.4%)~ 6,000 employees
Markets hearing aids and headsets in
100 countries across the world>DKK 900 million
R&D investment
We have delivered strongly… and will deliver again
“Innovation
& Growth”
2010 - 2013 2014 - 2016
2017 – 2019
“SMART”
Operations
2008 - 2009
“FAST”
R&D focus
”Hear more, do more,
be more”
• Innovation excellence
• Commercial excellence
• People excellence
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February 5, 2020
• Annual Report for 2019
Group financial highlights Q3 2019
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* EBITA (rolling four quarters) / avg. invested capital
DKK million Q3 2019 Q3 2018 Growth
Revenue 2,999 2,560 +17%
Organic growth 13% 12%
Gross profit 1,828 1,587 +15%
Gross margin 61.0% 62.0% (1.0)%p
EBITA 538 462 +16%
EBITA margin 17.9% 18.0% (0.1)%p
Profit before tax 451 386 +17%
Net profit 345 301 +15%
EPS 2.60 2.25 +16%
ROIC* 24% 23% +1%p
Free cash flow excl. M&A 563 349 +61%
Cash conversion 105% 76% +29%p
NIBD/EBITDA 2.1x 1.6x
Strong quarter across the group
• Organic growth of 13%
• Double-digit increase in revenue, gross profit, and
EPS
Highly differentiated R&D
• Launch of customs additions to ReSound LiNX
Quattro family
• Launch of direct Android streaming
• Launch of Jabra PanaCast
• Launch of Jabra Elite 75t
Very strong cash flow generation
• Free cash flow up 61% – cash conversion of 105%
• NIBD/EBITDA slightly above 2x driven by timing
effects, the implementation of IFRS 16 and M&A
Full year guidance confirmed
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GN Hearing: Strong global markets driven by attractive megatrends
Ageing population
597 791
2013 2018E
+6%
Elderly with hearing loss
prevalence2
Room for penetration
growth
60-65%
35-40%
USD ~5bn
‘22E’21E
~3-5%
‘17‘14 ’20E‘11 ‘12‘10‘07 ‘16 ’19E‘18‘08 ‘09 ‘15‘13
Global hearing aids market growth
(Value based on wholesale ASP)
~3-5% expected value CAGR in coming years…
With hearing loss Without hearing loss
• 65+ population
expected to grow
significantly
• Baby boomers
generation reaching
retirement age Polulation of 65+ years old (million)
• Increase noise pollution
drives prevalence of
hearing loss
• Penetration still relatively
low, especially for less
severe hearing loss
Profound
Severe
Moderately
severe
Moderate
Mild
Aided
Source: Broker reports, internal GN figures
(1) Market share is based on total units sold
~15%
~17%
2010 2016
~2%-points
8 years of positive organic
growth, driven by innovative
product launches
20182010
GN Hearing market share development over time…(1)
… driven by multiple attractive megatrends
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1
~4%
GN Hearing’s innovation leadership towards natural hearing
New chipset – brilliant sound experience: unprecedented Layers of Sound™
and world’s most advanced rechargeable solution
Unprecedented benefits across three key dimensions – Sound Quality, efficient
and convenient fitting and groundbreaking remote fine-tuning
Surround Sound by ReSound upgraded with Spatial Sense, helping the user
hear where sounds are coming from, leading to more natural sound experience
The world’s first Made for iPhone hearing aid
World’s first 2.4 GHz based ear-to-ear data exchange, Binaural Directionality,
enables users to decide which sound to focus on
World's first 2.4 GHz wireless system
6th generation
2018
5th generation
2017
4th generation
2015
3rd generation
2014
2nd generation
2012
1st generation
2010ReSound Alera
ReSound Verso
ReSound LiNX
ReSound LiNX2
ReSound LiNX 3D
ReSound LiNX Quattro
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Another industry first and four new ITE models expanding
the ReSound LiNX Quattro portfolio
Highest input dynamic range in the industry
Only CIC in the market with direct streaming
and E2E connectivity
Brilliant sound quality with Layers of Sound
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Driving growth through strategic collaboration
Partnering up with
tech giants
Exposure to fast-growing
cochlear market
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Refraining from
vertical integration
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GN Audio is strongly positioned in a very attractive portfolio of markets
Call-centric Task-based
“Calls for a living“
(e.g., contact centers, customer service, traders)
Office-based
knowledge workers
Preference for great calls, music
and an active lifestyle
#2 Fragmented market#1
Jabra Engage Jabra Evolve
Jabra Speak
Jabra PanaCast
Jabra Elite
Source: Frost & Sullivan, MZA, GN Audio
*Jabra Elite now accounts for the majority of the consumer business **Position in True Wireless category ***Indicative
”True wireless”
#3-5**Market position
Relative
market share**
Market trend
Primary product
offering
Characteristics
Segment
Gross margins***
Replacement cycles*** ~ 5 years ~ 2 years~ 3-4 years
CC&O Consumer*
USD ~ 1.4bn growing with ~ 9-11% CAGR USD ~ 9bn growing double digitMarket size***
• Exclusive distribution
through distributors
and resellers
• Broad and deep
product portfolios
required
• Long term relationship
drives future growth
Distribution
• Product complexity,
open-offices, and
increasing background
noise require superior
technology
• Technology
advancements, incl. AI
to support efficiency
improvements for
customers
Technology
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Strong global CC&O market development supported by attractive megatrends
• Current penetration
rates of office headsets
only at ~15%
• Penetration rate
expected to double by
2025 driven by expected
doubling of UC (Unified
Communication)
licenses
Source: Frost & Sullivan, MZA, GN Audio
UC growth driven by attractive megatrends
• Millennials – representing 75% of work force by 2025 – require flexibility in working
style
• Emerging focus on cloud-based solutions making UC wider available
• Improvement of technologies, including 5G, enable further reach and application of
UC platforms and usages
• Corporates seeking to reduce travel costs and carbon footprint; whilst improving
productivity and effeciency2014 2018 2025
USD ~1.4bn
CAGR: ~7%
CAGR: 9-11%Task-based Call centric
0%
10%
20%
30%
40%
50%
0
100
200
300
400
500
600
2014
~525
~15%
2018 2025
Global office workers (millions)
Task-based headset penetration
~9-11% expected value CAGR in CC&O market
Penetration of task-based headsets increasing Increasing barriers of entry to the market
• Extensive collaboration
and integration with
software vendors
• Certification process
through software
vendors requires
extensive investments
Integration
1
2
3
4
Call centric CAGR (2018 – 2025) growth: 0-(5)%, Task-based CAGR (2018 – 2025) growth: 13-17%
Jabra PanaCast – first step to position GN Audio in the fast-growing huddle room
video conferencing market
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• In Q3 2019, Jabra started shipment of
Jabra PanaCast, engineered to be the
world’s first smart Panoramic-4k-pixel
Plug-and-Play video solution
• Jabra PanaCast’s leading-edge cameras and
microphones, fourth-generation stitching
technology and Intelligent Vision software
work as one to ensure optimal performance
• PanaCast is still expected to be accretive
to earnings already in 2020
Improving meeting
efficiencyStrong
growth
Substantial cost savings and
carbon footprint reduction
Current challenge... ... solved by Jabra PanaCast
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Focusing on creating shareholder value
Attractive megatrends of aging
population and personal communication
in industries with high entry barriers and
currently low penetration
Innovation leader – uniquely
positioned towards future technology
trends with hearing aid and headset
expertise under one roof
Strategic agility, with no owned retail,
ensuring attractive positioning towards
future distribution trends
Strong track record of strategic
partnerships with leading
channels and customers as well as
with leaders in adjacent industries
Synergistic M&A – channel access
and commercial excellence, technology
leadership, streamlining activities
Lean business model and resilient
cash generation driving attractive
shareholder returns
Strong board and
management team with
proven ability to drive a growth
agenda
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Strict focus on capital allocation drives shareholder value
Organic investments
Synergistic M&A
Annual dividend
Share buybacks
GN capital allocation over the past 3 years
CAPEX ~5%1
1: Investments in property, plant and equiptment
R&D ~30%
M&A ~15%
Share buy back
~45%
Dividend ~5%
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GN in a nutshell
We deliver on our promises
We drive customer satisfaction
We pioneer our industry with
leading edge technology
We are lean and focused
You benefit