GN Store Nord A/S

Hello, everyone, and welcome to GN's conference call in relation to our Q1 report announced yesterday evening. Participating in today's call is Group CEO, Peter Karlstromer; Group CFO, Soren Jelert; and myself, Rune Sandager, Head of Investor Relations.

The presentation is expected to last about 20 minutes, after which we'll turn to the Q&A session. The presentation should already be uploaded on gn.com.

And with that, I'm happy to hand over to Peter for some opening remarks.

Thank you, Rune, and thanks to all of you for joining us today. Let's start with some highlights on the quarter.

Our Enterprise business experienced strong growth in the U.S. and the APAC market, while EMEA continues to experience weak demand and some level of channel inventory reductions.

We started shipment of our Evolve3 range at the beginning of March, and we have been very encouraged by where we've seen so far. During the quarter, we experienced significant growth in the premium segments of headsets.

This is exciting as we will be launching further additions to the Evolve3 family later this year that will gradually support our growth in Enterprise. On the margin side, we have had a soft quarter as expected due to the annualization of tariffs and inventory provisions related to warehouse movement in the U.S.

and certain channel investment to support the launch and rollout of the Evolve3 headset platform. In Gaming, we continue to gain market share in the gaming equipment market influenced by continued weak consumer sentiment.

While Gaming also faced some of the same margin headwinds as Enterprise due to tariffs, we have managed to control it through positive ASP development coming from the price increases implemented last year as well as a continued good cost control. We have just launched an exciting addition to our gaming headset portfolio, the Nova Pro Omni category, which is expected to contribute with growth for '26.

In addition, we still have a strong product pipeline in the coming quarters, and we look forward to even more exciting launches in '26. Moving to our Hearing division, that now is treated as discontinued operations due to the announced divestment to Amplifon March 16.

While we prepare for the closing of the transaction, the Hearing division continues to perform well and in the quarter across regions and channels grew with the help of ReSound Vivia, driving continued market share gains, which led to an organic revenue growth of 9%. With this summary, let me provide you with some more details on the performance across our divisions.

In Enterprise, the business continues to do well in the U.S. and APAC, but due to the continued weak demand and some channel inventory reductions in EMEA, we delivered a negative 5% growth in the quarter.

The gross margin ended at 53.7% in the quarter, which was around 2 percentage points lower than last year due to the annualization of tariff costs as well as some temporary effects due to an inventory provision related to the U.S. warehouse movement.

We expect the gross margin to stabilize in the coming quarters. The divisional profit margin reflects the development in gross margin as well as some higher channel investment into the Evolve3 launch and rollout.

The launch of Evolve3 has been very well received and is progressing better than expected, driving significant growth in the premium segment of headset. This is encouraging and supports our growth ambitions for the year as we extend the Evolve3 family.

Let's move to the next slide for a bit more detail on this. Within our premium headset category, where we have started the shipment of Evolve3 75 and 85 in March, we have experienced more than 50% growth year-over-year in Q1.

This is, to some extent, driven by channel stocking of the new products, but the sell-through to resellers also showed strength in the segment, which is an encouraging sign of momentum. The premium category accounts for around 15% of the Enterprise revenue.

Evolve3 did contribute to growth in Q1, and we expect the effect from the launch to grow stronger over the year as we launch more products. In Q3 and in particular, in Q4, we do expect to see a significant Evolve3 contributions to absolute revenue and thereby also growth.

As for the channel reductions we experienced in EMEA in Q1, we expect them to continue in the next few quarters given the current geopolitical uncertainty and the desire for several distributors to reduce the inventories. To help you understand how we plan our year, we would like to tie all this together.

As several of you know, we normally see a revenue seasonality between H1 and H2 of around 47% sales in H1 and 53% in H2. Due to the short-term channel reductions and the H2 benefit of the Evolve3 rollout, the revenue seasonality will likely be more pronounced this year, which we have factored into our guidance.

Let's move to the next slide and take some further look into the dynamics we observe in the markets we operate in. On this slide, we're illustrating the different dynamics that have contributed to the top line development in Q1.

Our sellout in North America and APAC continued to be very strong. This has also been supported by some market share gains, in particular in the U.S.

The channel inventories are stable, both in North America and APAC. And for both regions, we delivered double-digit organic revenue growth in the quarter for our core Enterprise business.

Our main challenge for Enterprise is EMEA that is also the largest region. In EMEA, we are experiencing a weak market demand due to the geopolitical uncertainty.

We also lost some market shares in the region, which can be expected from time to time given our more than 60% market share position. The decline is mainly related to the entry-level price points of headsets where we have seen increased competition.

We do expect to regain this share with the launch of Evolve3 when we're launching these products relatively soon. Lastly, we've also seen some channel inventory reductions as our distributors navigate the global uncertainty.

These effects together have resulted in a double-digit organic revenue decline in the quarter for EMEA. We do expect the challenged market conditions in EMEA to continue for the next few quarters.

We focus on successfully upgrading our portfolio by rolling out the Evolve3, and we do expect this will stabilize our growth as the year progresses. Let's move to the next slide for some highlights and performance in the Gaming division.

In Gaming, we delivered a negative 1% organic revenue growth in the quarter on top of a very demanding comparison base of 11% growth last year. This was driven by strong execution in a relatively soft market suppressed by continued muted consumer sentiment.

The growth was supported by a good momentum in the headset segment, while low-end keyboards and mice provided some growth headwinds. Region-wise, North America contributed positively, while the business was somewhat weaker in EMEA and APAC.

The gross margin of 34% was negatively influenced by the annualization of tariff costs as well as the wind-down effects in Q1 of the consumer business. This was partly offset by a positive ASP development coming from the price increases introduced last year.

The divisional profit margin developed positively to 11% compared to 10.4% in '25, despite the negative development in gross margin, reflecting a continued good cost control. Let's move to the next slide for some more information on the gaming launch.

SteelSeries expands our premium category of gaming audio with the introduction of the Arctis Nova Pro Omni. This headset enhances overall experience for the modern gaming, providing the best circumstances for ultimate immersion with the best ANC in gaming and an AI noise rejection baked into the microphone for impressive background noise reduction.

The ability to connect to 5 devices at once with real-time audio control and infinite battery life enables complete omnipresence while the sound experience is enhanced further with a Hi-Res Wireless Certification and custom Hi-Res magnetic drivers. Coming in a new refined compelling design, this is a truly step-up in the Nova Pro headset category.

We're excited about this launch and do expect the Nova Pro Omni to meaningfully contribute to SteelSeries growth from Q2 and onwards. With these updates on the Enterprise and Gaming divisions, let's move to the next item on the agenda, where Soren will provide some more details on the Hearing transaction.

Thank you, Peter. On March 16, we announced the divestment of our Hearing division to Amplifon.

Let me give you an update across key aspects of the transaction and its value creation. The carve-out process is well underway, and we continue to expect the transaction to close towards the end of the year as previously communicated.

The transaction proceeds comprise a cash payment and the shares in Amplifon. The shares are subject to the customary lock-up period.

We are excited to create an industry-leading player with Amplifon by combining our strength. We are convinced that this transaction will contribute with significant value creation for GN and Amplifon shareholders.

While we do not see ourselves as a very long-term shareholder in Amplifon, we give our new strategic -- given our new strategic direction, we will be patient and wait for the value to be realized before we responsibly and in a controlled way sell our shares. The carve-out will be taxable, and we expect an upfront tax payment of DKK 1.5 billion to DKK 2 billion.

However, we will also get an equal sized tax asset that can be used for tax reductions over the coming years. To unlock shareholder value, we are committed to return excess cash to our shareholders.

We are currently, in the short term, targeting a leverage of 1 to 1.5x EBITDA. Shortly after closing, we plan to initiate a share buyback program.

To avoid any doubt, we also like to be clear that we are not planning to do any large-scale acquisitions. So the excess cash at closing and additional cash when we exit our Amplifon shareholding is expected to be returned to our shareholders.

Moreover, to address stranded costs and to set up GN for financial success, we are initiating cost initiatives to be executed during '26 that would deliver around DKK 200 million in structural cost savings. To separate Hearing and to adjust our cost base, we estimate total one-off cash costs of DKK 750 million across '26 and '27, of which around 75% is expected this year.

Related to the separation and to the setup of GN for the future, we have also, in Q1, executed a number of noncash impairments. On the next couple of slides, I'll provide you with some additional details around some of these initiatives driven by the transaction.

Let me first start by framing the size of the initial cash we will have available for distribution. With the cash proceeds from the transaction, net of tax, we will have an excess cash position.

On top of this, we will drive a healthy operating cash flow in '27, which will further add to the positive cash position. In order to reach a leverage target of 1 to 1.5x by the end of '27, this would imply a quite meaningful excess cash holding somewhere between DKK 3.5 billion and DKK 4.5 billion, depending on the EBITDA of the business and the leverage target.

As an overall planning assumption, you should expect the significant majority of this excess cash to be distributed back to our shareholders. As we mentioned, we are currently planning to initiate a share buyback program after closing of the transaction.

Until the AGM in '27, we are authorized by our shareholders to hold up to a 10% treasury shares. We are currently holding 3.5% shares, so we can buy back around 6.5% shares, which equals to roughly 10 million shares.

At the AGM in '27, we will then propose a cancellation of any excess shares and ask for a new authorization, which would allow us to continue to significant shareholder distribution. In addition, we also expect to reinstate yearly dividends.

In the years to come, we will also have a few attractive financial assets that can be sold over time, which could drive even more shareholder distribution. We hope that this framework will help you to understand our priorities.

We will come back with more details about our capital allocation priorities at our upcoming Capital Markets Day, which will also allow us to discuss the framework with our investors. Slide 14.

We are focused on driving GN towards sustainable profitable growth. Let's talk about where we are and the steps we are taking in the near term.

All margin numbers on this slide refer to the new GN without our hearing business. If we start with where we are coming from, in '25, our restated EBITA margin is 7.6%, which includes DKK 200 million in stranded costs as part of the transaction.

While we in '26, will have limited operating leverage due to the low growth from our challenged markets, we still expect to drive a margin expansion from cost focus and also from lower average tariff exposure than we had in 2025. We'll also benefit from some of the balance sheet adjustments, which we announced today.

This will, in total, lead us to an EBITA margin of 8% to 9% for the year. The effect from the cost initiatives of around DKK 200 million will further support our underlying margins with around 2% in '27.

With the help of these steps, you will derive at an underlying EBITA margin of 10% to 11%. This margin level then serves as the structural margin level, which we will further improve in the years to come.

We will share more of our plans around this at our upcoming Capital Market Day, which we plan for towards the end of the year. At this event, we will explain our plans for how to accelerate growth and drive margin expansion beyond where we are now, thanks to attractive markets, customer-centric innovation, selective investments and strong execution.

Next slide, please. As a natural consequence of the transaction, we will be having some one-off costs related to the transaction.

We estimate a total of one-off cost of DKK 750 million, of which 75% is expected to be incurred in '26. The one-off costs comprise of costs directly related to the transactions such as adviser and consultant fees, legal costs and the likes.

To complete the carve-out, we will have costs for advisers, legal support, IT consultants and costs related to contract separations. As we communicated today, we will also have costs for rightsizing of the business, which mainly will serve the severance costs.

As for 2026, one-off cash costs, you should assume that most of these will be in the discontinued operations as these are costs necessary to drive the carve-out, while the rightsizing costs will be sitting in the continued operations. In total, this means that roughly 70% of the one-off cash costs in '26 will be related to the discontinued operations.

Finally, we have done some asset impairments across IT, R&D and facilities. The majority of these is related to a large ERP project within our Hearing division that is not part of the transaction perimeter, and we are therefore subject to an impairment to the asset.

The impairments are noncash by nature and is incurred in the first half of 2026. With that overview of the status and impact of the transaction, let's move to the group numbers and the related guidance.

As a consequence of the transaction, our Hearing division is now treated as discontinued operations. So from now on, we will focus on the performance of the continuing operations in GN, which comprise of our Enterprise division, Gaming division and group functions that are not part of the transaction perimeter.

In Q1 of '26, the continuing business delivered organic revenue growth of minus 4% due to the challenges in the EMEA part of our Enterprise division. The gross margin ended at 48.2%, reflecting gross margin development in Enterprise, as Peter mentioned earlier.

However, we do expect our more normal gross margin in Enterprise already from Q2, and we will likely also see further improvements in gaming. The adjusted EBITA ended at DKK 6 million, equal to a margin of 0% compared to 6% in Q1 of 2025, driven by the development in the gross margin as well as negative operating leverage.

The cash flow development in the quarter is including the discontinued operations. In Q1 of '26, GN delivered a free cash flow, excluding M&A of negative DKK 45 million, driven by seasonality, but offset by well-managed working capital.

The net interest-bearing debt ended at DKK 8.9 billion, corresponding to an adjusted leverage of 3.8x EBITDA. Let's move to the next slide for our group financial guidance for the year.

First, I would like to say that we are now reintroducing our guidance on EBITA margin, which was suspended when we announced the divestment of the Hearing division to Amplifon. As mentioned earlier, we are now guiding for a full year '26 adjusted EBITA margin for continuing operations of 8% to 9%.

The benefits of the DKK 200 million cost savings would then come on top of this number and will be visible from 2027. Our guidance on organic revenue growth is a result of assumptions from our 2 divisions.

The performance of our Gaming business in Q1 has been fully in line with our plans for the year, while we are confirming our early applied assumptions, which were an organic revenue growth contribution of 7% to 13% for the Gaming division. As Peter mentioned earlier, the demand in EMEA and Enterprise has been weak in the first quarter, and we are now taking a more cautious perspective to the underlying market development in EMEA.

Consequently, we are now assuming a modest declining global Enterprise market for the year. However, due to the early feedback around Evolve3, we remain confident in our ability to drive market share gains for the year, while we are assuming Enterprise to contribute with organic revenue growth of minus 3% to plus 3%.

As a function of the divisional assumptions across Gaming and Enterprise, we, therefore, are updating our organic revenue growth guidance to 0% to 6%. And with that, I'm happy to hand you back to Rune.

Thank you, Peter and Soren for the updates. That was the end of the presentation.

I will hand over to the operator for the Q&A. Please limit yourself to 2 questions at a time, please.

I have 2, please. One, I just would love to understand what gives you the confidence in that improving growth outlook in Enterprise.

And I guess maybe you can kind of touch upon, one, what gives you confidence in the growth improving, but two, also what gives you confidence in the improving margins? I know you've not given an Enterprise guidance, excuse me, but obviously, that, I think, was the piece that the market was most disappointed this morning.

And then I have a quick follow-up after that, but maybe we can start there.

Thank you so much. I think it's fair to say that we are a bit behind what we expected here in Q1, and that's also why we're making some adjustment, of course, to the outlook.

But I think what remains the same is that we always believed in a much stronger second half of the year than early half of the year. And this is solely due to the Evolve3 product launches.

We have now launched the first products in late Q1, and we shared some of the initial encouraging effect of this where we see a very healthy growth. And when we say growth, we're then looking on the segment as total, so the old product and the new products together, how do we perform now vis-a-vis a year ago.

We do expect to see similar effects as we're launching products in the medium and the entry-level segments of the market. And this is also where the majority of our Enterprise business is sitting.

So this is essentially why we are believing in a much stronger second half of the year. So this will help us then to improve the momentum, in particular, in Q3 and Q4 compared to what you see here in the beginning of the year.

Then when it comes to the margins, we had some one-off effects in this quarter, and we highlighted them here in the intro. And there is something related to the tariffs first where, of course, we didn't have tariffs in the beginning of last year.

And then the other one is this movement of the warehouse, which is also a one-time effect where we're taking some kind of provisions related to that. So we do expect the gross margins to bounce back already in Q2, and you should see them on more, what you say, levels that you have got used to throughout the rest of the year.

And then I would say, of course, also if you look more on the divisional margins and on the group margins, they will, of course, be supported by the growth as well. So this is our thinking around it.

And that was actually going to be my follow-up. Can you quantify the warehouse provision for us or the impact that it had on the gross margin this quarter?

Veronika, the warehousing is around 1% in terms of the implications in this first quarter. And then, of course, you have the tariff also that is also -- bear in mind that the tariff is sitting on the balance sheet.

So whatever was the improvement in the tariff in the quarter 1, you won't see that until a little further down the line once we start to pick the product from the balance sheet. So that's also why we are confident in that it will actually improve our underlying margins because Q1 is mostly, of course, linked to the old tariff that we saw during last year.

A question to Enterprise and the comments you have about North America, where you say strong growth, but your segment breakdown points to a decline in Danish kroner of 8.5%, the dollar is down 10%. So I guess you have something like a 1.5% growth in North America for Enterprise.

I don't think that is strong or am I missing something here? And secondly, the EBITA margin of 10% to 11% for 2027, what level of amortizations are you expecting that year?

Because I have a little bit difficult stripping out all the balance sheet impairments today and estimating the impact on future amortizations from these. Yes.

So thanks a lot for the question. Let me start.

I think the comment I made in the intro was mostly the Enterprise core. It's essentially the core Enterprise headsets.

As you probably recall, we also in Enterprise, the way we report, have BlueParrott as well as FalCom. If you look in North America, there was not any real impact of FalCom in any way.

But BlueParrott had a very good quarter last year and a weaker quarter this year. So that is essentially putting some negative effect.

So if you filter that out, actually, the growth we saw in the core enterprise was a very solid growth in North America. So hopefully, that helps understand.

Just one more comment related to this to help you all. I mean, I think that some of you probably will also reflect and we did have some FalCom business in the quarter.

So to some extent that, that positively contributed to the overall Enterprise numbers. But as I mentioned, we also had a bit of a negative contribution from the BlueParrott.

So they more or less netting each other out, so to say, if you look on the global Enterprise numbers. But in North America, it's a BlueParrott negative effect.

Okay.

Then to the impact of the amortizations, I mean, the majority of it, given that we already do it now, you see the positive effect of that this year, and that's baked in. Of course, as it's also a full year and part of the portfolio also is depending on it, there is a little step up next year, but the majority is this year.

But can you help us understand what the EBITDA margin guide would have been for '27 without these impairments?

Yes, fair. I think approximately, it's 1% that it's -- that's the tailwind we can have from these amortizations this year.

And we'll have the same next year, essentially because it will continue over multiple years.

This is Andjela. The first one is just on Enterprise.

I'm interested to hear your thoughts on the phasing of the growth for the rest of the year, especially because on Slide 7, you signaled that Evolve3 portfolio should contribute less to group growth than in Q1. And as far as I remember, you only launched Evolve in March.

So just curious why should we assume less of contribution in Q2? And the second question is more like a follow-up to Veronika's question on profitability.

So with the adjusted EBITDA margin of 0.3% in the quarter, just -- can you help us break down the improvement assumed for 2026 and 2027? I understand that the provision is 1 percentage point, but what else should drive the improvement from here?

Okay. Thank you so much.

Let me start with the phasing. I think that these are the base assumption.

It might vary a bit. So I don't think we can read into the very details of this.

But we -- I think it's back to how we launched the product. So in Q1, we launched the Evolve3 85 and 75, the premium products.

Then when you launch, you're getting the initial channel stocking, which is essentially all channels are filling up the products. And then if you look on Q2, you will not have that initial stocking effect.

So it's more like a replenishment of what being sold out. So it's still a very healthy contribution, but we do expect it to be slightly less than in Q1.

And then why it's picking up again in Q3 and Q4 is because then we are launching more d Evolve3 products into the mid- and lower-tier segments of Enterprise.

And when it comes to the buildup on the margins that, of course, was muted here in quarter 1, I think a couple of things. Of course, we do have the impairments, and that's probably an easier one, right?

That's a 1%. But in general terms, the business we have left in GN has a higher share of the profitability and a higher share of also the sales in a normal year in the subsequent 3 quarters and especially in the second half of the year.

So you should always expect us to earn a larger part of our earnings and also through that, have a better leverage in the second half of the year that should drive up towards the 8% to 9% in margin. So it is top line driven, but it's also a fact that we generally earn more the way our company is the seasonality in the company.

And then in addition to what we then land this year, you should think of it as the 2 percentage points, they come on top of the landing of this year in terms of us addressing the stranded costs this year, but the benefit of addressing it will deploy next year and give the 2% margin uplift.

Just a follow-up on the first one. So basically, you assume that Enterprise will decelerate into Q2.

Is that a fair assumption?

If we look on the Enterprise core, we do think it will be relatively similar. So don't expect a significant effect in any way.

If you look at Enterprise in totality, what we need to factor in then is also the FalCom business where we had a very large order last year. So if you include FalCom, we probably could see some pressure on the number from that year-over-year comparison.

We do expect we will have a good year on FalCom, but it will come more towards the end of the year. So we have talked about that before.

It's a little bit, of course, lumpy in the way this business is delivered. So hopefully, that helps you to think about Q2 in the right way.

My first question is on your expected tax going forward. So you're talking about this tax reduction for the coming years.

So would that be fully lifted in your tax in '27 and onwards? Or should we still assume 23% tax rate in your P&L?

And secondly, could you just update us on the situation about nation's benefits and to what extent there is a sale process ongoing for this asset?

Niels, on the tax, our base assumption is that the tax we are paying will approximately stay at the same level, but we'll, of course, get back to you if we get different clarity on that. So that would be our working assumption based on how we calculate today in the P&L, of course.

And then in terms of paid cash tax is, of course, reduced as we will be able to take advantage of the tax assets we are having.

On nations, I think no real update on any imminent sales process. The underlying business continues to develop well, and we will act together in coordination with other major shareholder when the time is right, but no real further info at this time.

Martin Parkhoi, SEB. Just also two questions.

First on the guidance, 2 questions. Firstly, maybe just around for both.

If we look at the guided interval in the old year, you had an interval range of 2 percentage points. Now you put a very narrow guidance range on the EBITDA margin of 8% to 9% in a business where your ability to forecast the development in the last couple of years has been difficult.

So can you be so confident in such a strong guidance range on the EBITDA margin and also on the guidance side, maybe that's for Peter. On Enterprise, it is a little bit confusion on the commentary as also Carsten alluded to that you make the commentary on the headset business and then afterwards, we talk about, yes, BlueParrott was a little bit high last year.

So can you maybe say that on the minus 3% to plus 3% Enterprise growth, what's the assumption for the core Enterprise headset business on that side? And then just as now you have revealed some details on hearing still with a very good quarter of 9% organic growth.

What drove that acceleration? And have you seen your share to Amplifon increase in the quarter?

Martin, basically, on the guidance for the year of us being more precise, I think we are having the insights now. We are now further into the year.

And we also believe that now our outlook is more firmed up of how we see the cost patterns also pan out and also how we see the overall landscape of the top line. So it is a function of that we are closer through the year essentially, and that makes us more confident in the 8% to 9%.

Okay. And when it comes to the BlueParrott and FalCom, for the year, we do expect similar sales this year for both as we had last year.

So there is not a real effect from them on the Enterprise growth, so to say. So for the core Enterprise is the same as the guidance we have given.

The comments are more because in individual quarter, there could be effects. So we're more making these comments to try to help you understand the business in that way.

And then if you look on the Hearing business, I mean, yes, thank you. We had another very good quarter in Hearing.

It was a broad-based growth across the 3 regions. I mean I don't want to go and comment specifically on the Amplifon business as we would not I can confirm that we still have no customers that are, I mean, 10% or higher, and that's also true in this quarter.

So I would say it's been a broad-based growth across regions and channel types.

Mine is a more long-term question on the Enterprise market. So we're heading into what looks like the potential fourth year of negative growth in that business, which will now be the majority of the group's revenue following the hearing sale.

Could you update us on your thoughts on midterm growth in this market? And I guess in conjunction with that, previously, you've talked about a 3-year replacement cycle.

Is this still the replacement cycle that you're seeing? Or is this lengthening?

Thank you. And we appreciate it's been a long adjustment period here after the strong COVID growth.

I mean taking a step back, I mean, we very much still believe in the attractiveness of the Enterprise market. And then when we're saying that we are taking, of course, a longer-term horizon on this.

If we look on the strength of the market, I think it's encouraging to see what we see in North America and APAC. The market here has actually been in growth for the, I mean, 6 quarters now in a row.

What has, to some extent, surprised us is the continued weakness in the EMEA market. And it has had a period of encouraging signs of improvements and coming back to growth and then setbacks.

And we have some level of setback now also, likely driven by the more macroeconomic uncertainty driven about the unrest in Middle East and so on. The indirect effects of that seems to be that there are many companies across Europe, which have tightened spending and it's affecting us also.

So in terms of the long-term belief in the market, I don't think anything has changed. We are working now to develop a new kind of mid-range plan and with detailed targets and so, which we intend to share with you at our Capital Markets Day here towards the end of the year.

But the attractiveness in the market, we still think it's very much there. And then in terms of your question on replacement cycles, I mean, on average, we still assess them to be around 3 years, and then the periods can be slightly longer or slightly shorter.

But if you look like over some period of time, that is still our best assessment of it. I will say though also that this year is likely one of the years in a long time where we will launch most products, and we started now in the beginning of the year, and we will launch many more products throughout the year.

So I do think that our guidance, you should factor in that there is, of course, a market element of it, but also what's in our control in terms of launching strong products and having good launch processes is quite a lot of what's in the guidance as well. So we're coming back to this that as we're launching more products this year, we do also believe that will support the Enterprise business very well.

Okay. Great.

And just quickly on the replacement cycle, is that the same across sort of different categories, call center, sort of office workers and frontline workers?

It actually varies a bit across them, as you say. call center tend to be slightly less and office workers slightly longer.

But given that we have the majority of the business with office worker, we're trying to weigh it, see it as a blended average. So that is around these 3 years.

I just wanted to ask on the conflict in the Middle East and if you're seeing anything in terms of inflation, increased transport costs or raw material and especially considering you're in the launch phase in Gaming and Enterprise and you need to ship these products from Asia to North America and EMEA market. Is any of this impact reflected in the new guidance?

Thank you so much. I would say that both direct and indirect effects from the Middle East and rest.

The direct effects on us includes things you mentioned, like logistic costs are slightly elevated. You need to find new shipment routes and also, in particular, around launches, we have been using a bit more flights for transportation of the products -- so that has some impact.

That is factored into the guidance. The indirect effect, we actually think is the larger ones, which we think is one of the key contributors to we see -- the weakness we see now in EMEA, which is also factored into the guidance as we have shared with you today.

So everything is in the guidance, but we do expect this actually holding back the business quite a bit, mostly on the EMEA side. The direct margin impacts, I think, are quite manageable for us.

So that is not anything significant.

I hope that you can hear me okay. I have one which is just like a clarification on Enterprise.

So if I'm correct, you said the core Enterprise roughly down 5% again in Q2. Then we take the 5% comes from FalCom, so roughly Enterprise down 10%.

So first of all, is it correct? And can you just help me to bridge the H1 performance in Enterprise to the full year guidance, especially to the upper end of this guidance?

And maybe just a quick follow-up on margin. I expect that this could have a pretty negative impact on margin next quarter.

So could you also help us to understand the magnitude of it and the kind of margin we should expect from this business?

It was a little difficult to hear you in the end. Could you please repeat the margin question, please?

Yes. No, on the margin side, just when the top line declined potentially by 10%, I assume some like operating leverage.

So any comments about the margin at the divisional level or just like the EBITDA margin impact that we could expect from this like low growth will be -- would be helpful. Any comments?

I think when it comes to the margin, we are anticipating, as we also said, that the gross profit will improve already from quarter 2, actually. And as such, it's more down to the absolute value.

When you look into the growth rates, bear in mind the comparators of last year, that's, of course, important. And coming into quarter 2, as also Peter spoke to, we had a FalCom order, large order that was in quarter 2.

So essentially, that will give some pressure on the growth rates for quarter 2. But from a margin -- gross margin standpoint, there, we expect the uplift to be seen already from quarter 2 and onwards.

I can also clarify, I think you -- if I understood the first question right here, also the growth in the quarter. I mean, we had a bit of a positive effect from FalCom and a bit of a negative effect from BlueParrott.

So the core Enterprise growth, I think, is very close to the reported growth for Enterprise.

I just want to ask a couple of technical questions around the new structure and just how we should be thinking about the next steps. Just the timing of buybacks, are you willing to do buybacks before the deal closes?

Or are we waiting for the deal to close? And I guess, would you want to wait for authorization to do a bigger buyback?

Or would you be happy to use the 6.5% before we get there? If you can talk to that, that would be helpful.

And then just a very technical one, apologies. But from a covenant perspective, anything that we need to be aware of until the deal closes or effectively, the debt is fine even as the leverage is kind of changing optically at least in the deconsolidation process?

In terms of the buybacks, what we have said today, and also stands, is that we will wait until we have closed essentially and then go for the buybacks. As I also said in my intro that we have the 6.5% left in our -- the permit we have basically to the 10%, and that's where we will go first.

So that's at least on the buyback side. And then the other question was on -- on the covenants, yes, we -- of course, yes, covenants, we are in a good balance there and also have commitments from our banks in terms of this process.

So that is in good control.

Thank you very much, operator, and thank you, everybody, for joining on the call.