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GN to gradually wind-down its Elite and Talk product lines. Strong performance in the Hearing division to partly off-set the extraordinary impact from the gradual wind-down

Henrik

tirsdag 11. juni 2024 kl. 9:22

GN Store Nord
https://ml-eu.globenewswire.com/Resource/Download/8ba9c066-bb71-49ac-88f8-443c2bc766b0

Today, GN has decided to gradually wind-down its Elite and Talk product lines to further increase focus and resources on more attractive parts of GN’s business.

As communicated at the Capital Market Day in May 2024, GN is striving to build leading businesses in attractive markets and by this grow with healthy margins and ensure good returns on the invested capital.

The re-focusing of the Elite product line towards the premium segment, which was initiated in 2023, has resulted in a stronger profitability level than before. However, the investment required for future innovation and growth in this very competitive space is deemed unjustified in the long-term given associated risks. The Talk product line follows a similar logic and is positioned in the declining mono Bluetooth market. Consequently, following a thorough business review the decision has been taken to gradually wind-down both the Elite and Talk product lines.

Peter Karlstromer, CEO of GN Store Nord, comments: “The decision to gradually wind down the Elite and Talk product lines is part of our commitment to focus on attractive markets where we can deliver profitable growth and strong returns.

We have demonstrated that we can compete in even the most challenging categories with our leading technology and go-to-market strengths. We did this with our Elite line by delivering multiple worlds-first innovations for consumers, especially in true wireless earbuds, driving global market share gains. The markets, though, have changed over time, and it is today our assessment that we cannot generate a fair return on investment compared to the many other opportunities we have within our Hearing, Enterprise, and Gaming businesses.

I am very grateful to our retail partners, who have supported us on the Elite and Talk product lines, as well as to the consumers who made us a part of their lives. We remain committed to working closely together to make this a successful wind down, including continuing with the launch of our final Elite products – the second generation of the highly acclaimed Elite 8 Active and Elite 10 – which are the best earbuds we ever made.”

GN will reduce the inventory of the affected products, of which most is expected to be completed by the end of 2024. GN will, however, continue to service and support customers for several years. This commitment to retail customers is underlined by the global announcement of two next-generation editions of the popular Elite 8 Active and Elite 10 premium earbuds. The Elite 8 Active Gen 2 and Elite 10 Gen 2, which will be the last two product introductions in this product line, will be announced today and available from later this month.

In 2023, the consumer business delivered revenue of DKK 1,253 million with the following split on sub-products: Elite product line (~70%), Talk product line (~10%), BlueParrott product line (~20%). The BlueParrott product line (DKK 269 million in 2023) will, financial reporting wise, be moved to the Enterprise division from 2025 as part of the effort to drive growth in the front-line worker opportunity.

Impact on financial guidance 2024
The decision to gradually wind-down the Elite and Talk product lines will negatively impact the revenue in the Gaming & Consumer division. As a consequence of the gradual wind-down including extraordinary promotional activities to reduce inventories, the 2024 revenue in the Consumer business is assumed to be impacted by around DKK -450 million compared to 2023.

Following strong execution in the first five months of the year, the Hearing division is assumed to partly off-set the negative impact from the gradual wind-down, supported by continued strong uptake of ReSound Nexia. The development in the Gaming business and in the Enterprise division in the first five months of the year has been in line with the original assumptions. For the Enterprise market specifically, it is still assumed that the market will turn into positive growth sometime in the second half of the year.

As a result of the strong performance in the Hearing division and the gradual wind-down, the group organic revenue growth guidance is narrowed from “2% to 8%” to now “2% to 6%”.

The gradual wind-down will include extraordinary promotional activities, which is expected to have a negative impact on the profitability in the affected product lines for the rest of the year. In addition to this, the group will incur extraordinary costs of around DKK -200 million in the remainder of 2024 (the majority is expected in Q2 2024) related to the gradual wind-down, including severance payments, write-down of prior development projects and inventories, of which the majority is expected to be non-cash.

Following the gradual wind-down and the strong performance in the Hearing division, GN is narrowing the EBITA margin guidance from “12% to 14%” to now “12% to 13%”.

As a result of a positive net working capital development, which will be further fueled by the gradual wind-down, GN now expects free cash flow excl. M&A of “more than DKK 900 million” for 2024 compared to “more than DKK 700 million” earlier.

Impact on long-term targets
GN introduced new long-term targets at its Capital Markets Day in May 2024, including an ambition to drive a CAGR organic revenue growth of 5-8%.

The wind-down will further support GN’s targeted margin expansion towards the 2028 target of 16-17%, and allowing to focus future investments and leadership efforts towards more attractive opportunities.

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.

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