Profoto Holding AB (publ) (PRFO) Earnings Call Transcript

[Operator Instructions] Now I will hand the conference over to CEO, Anders Hedebark; and CFO, Linus Marmstedt. Please go ahead

[Audio Gap] 2026. Thank you for listening in. [Audio Gap] In particular, was very good but that was mainly because of soft comparables. As you know, we are acting towards 3 types of customers. Number 1 is large photographic studios. Number 2 is the creator type of economy, which is a much larger customer group. And our third change we are going into the cinema business. So first of all, studios is similar to a project business, and it varies up and down quarter-by-quarter and month-by-month. But over the years, it's fairly stable. Q3 was generally -- is generally a weak quarter for this kind of business. And hence, it was also not a very strong quarter in studio sales. We are watching this, but we're not that worried because we think that it will hopefully bounce back. But as I said, it remains to be seen in Q4 and Q1 that we are shifting back to higher demand level. We can also see in this area that the large photographic studios are investing more in LED. And leaving the investments on flash fairly stable over quarters. So that was studio. For the creator side, this is a very large customer group. And in this customer group, you could see different kinds of creators. First of all, and this is for visual content creation, by the way. So first of all, it is the photography first. Secondly, is the video first type of creator and a lot of both photographers and videographers they were asked to do both video and still in the same production. Our focus is to follow the customers from photography to the video and still. And this is a fast-growing part of this market. Overall, this part of -- this kind of creator market is stable and is growing, and there's a lot of new players, new creators starting and hang creators starting in this market, they are always starting being both photographers and videographers at the same time. And they are very skilled in producing both kind of assets. So we see a lot of change, and we think that profit is well positioned by being the main premium brand for this kind of creators. And we drive sales in this market very much through large dealers. So we have many large dealers around the world and especially in the United States where we need to be very active together with the dealers. And you can see this in the quarter and that this is part of the sales growth in the United States in North America that we managed to get the -- our partners with us to do a lot of activities in terms of both marketing but also a lot of physical activities like demos and other kinds of venues where we get together with our main customer group because bear in mind that creating great light in either still or video images means that you do something by hand. It is not something that you can do online. It is something that you do in real life. We also see that a lot of these creators, they are dedicated to setting light at point of capture. Yes, they're using AI to make the images better. And yes, they're using Photoshop and other tools to make this happen. But everything happens at point of creation point of capture when they actually do their create. So it is an important part of our brand and our industry, and we see growth in this area. The third customer area that we are working hard in is the cinema market. Here, we are doing a market entry. We have Pro photo is the first time that we're really selling into this area. And the sales has started invoicing has started as we communicated over the quarters. What we're doing here is that we're ensuring that the [ graphers ] and DOP, this means the electricians that is actually setting and making lighting possible at the set of the cinema set as well as Director of photographers, they know and that they are using. They have tried, they're aware of and that they actually love using our products. So we are working with certain great [ gaffers ] in order to ensure that they are using our products. And this work has just started. And we already now see a demand that gaffers are talking to other gaffers and introducing a prophet products to each other. Secondly, in order to actually ensure usage, we also need to ensure that the products are available at cinematic rental companies. And we are very successful on that and especially in the U.K., but also in other parts of Europe. However, a lot of work remains to be done, especially in Mainland Europe in areas like Spain or Hungary, for instance, but also in the United States and North America. But we think that we have a very good position, and we see traction in terms of demand. But in sales figures, we see some effect on this quarter's sales figures. However, a lot of work remains, and we hope to expand the sales heavily in this area. In addition to this, our [ lead ] product that this is all about and especially our Pro panel is demanded in the market, but we're also working with getting in that product and other products into the large photographic studios that is slowly migrating to stills only to video and still in the same way or in the same studio. So we are working with the main studios to ensure that they test, long-term test our products. And this work has just started. So we believe and we hope that we should see growth in this area in LED sales over the coming quarters and also into next year. The EBIT resulted in and sales growth resulted in some sort of EBIT. And we managed to achieve SEK 19 million in EBIT, but it was positively impacted not only by higher sales, but also a refund of tariffs into the United States. This was a big part of the profit, approximately SEK 15 million accounted as a positive cost of goods sold effect. But we are working heavily internally with strong cost control and ensure that we have a stable cash flow from our operating activities. And as just said, the pro panel sales continued according to plan, and we have ensured that it has been used on several production worldwide. And 1 of the production was Baywatch, we can see 2 of the panels here on an LED set being used. So across the regions, we see a good organic growth in Americas and EMEA, whereas APAC and especially China had a slow quarter. In the U.S., we saw a total change of almost 22%, whereas 1.5% was currency effect, but still organic growth of 20%. Yes. We had soft comparables last year. But I would also like to mention that we have new management on board in the United States, which has had a positive effect on the level of activities. So we have a much higher market activities -- activity both directly on our own but also together with the large dealers in the United States. In EMEA, we had also soft comparables, but we had a good growth of almost 15%, whereas partly -- a small part of that was currency effect, as you can see. But it is based on what we do on our own, that we have a much higher activity in the European market. We have dedicated resources for the large dealers and we are -- we have a good marketing and sales team working hard in the European market to ensure that the customers are getting the hands on our product, testing our product and that the dealers are actively selling the product. So thank you very much, all dealers in Europe. Asia, we see a soft sentiment, especially in China, but also in other parts of Asia Pacific and China. And we see some sort of good traction in Japan, but that is very much based on one large brand studio that did a good work for us. So anyway, this is the varied performance that you can see across regions, and we are continuing into fourth quarter with high level of activity, and it remains to be seen then how the fourth quarter will play out. So over to you, Linus.

Okay. Thank you, Anders. And as Anders mentioned, top line increased by close to 8%, mainly driven by organic and not so much by currency. So that was okay from a top line perspective, but it's important to bear in mind that the corresponding quarter last year was fairly soft. And then if we look at the EBIT, it looks like we have 50%, which is the truth, but it is affected by the tariff refund of approximately SEK 50 million. So if you adjust for that, it's around 4% or SEK 4 million, corresponding to 3% EBIT margin. So it's important to have that as an underlying performance but if you look at the same corresponding figure for last year, it was minus SEK 10 million. So we actually saw quite good rebound in the underlying operating result which is encouraging. And also that we have mentioned before is that we have a fairly negative effect from the capitalization/depreciation ratio, which is continued to have a negative effect of the EBIT margin as such. Yes, next slide, please. And this is a slide that we have shown in previous quarters that we have a very good cost control. And as you can see, it has been fairly sharp reduction in the underlying cost base for the several quarters now. And the last -- the Q3 was, as you can see, SEK 66 million in the underlying cost base which is seasonally effective, but also that we continue to have a very tight cost control. And as we said before, in the second quarter, we had several fares and so on, which affected that quarter. And we see not a similar effect from fares but we will be active on the marketing side in the fourth quarter, partly related to the the campaign season as we always see in November, December. So that it could be -- you can expect some increase during the current quarter, but not a major -- not a major step up, but it will be slightly uptick. But all in all, very strong cost control. The next -- and here is -- this is -- to be able actually to drive sales and to be very flexible in the market, to be able to support our customers, et cetera, it's very important to have a solid financial position. And as you can see, we have reduced the net debt quite substantially during the last year. And now the EBIT -- the net debt is around SEK 150 million. And you can also say that the net debt ratio to EBITDA has reduced to 1.2x EBITDA, which is quite healthy ambulate and of course, the last quarter has been affected from the tariff refund in 2 ways. One is that has a positive effect on the EBIT, but also that we actually received the cash in August. So that is also in this equation. But all in all, very solid financial position.

Thank you, Linus. So to summarize, we see strong organic growth in some parts of the world. Yes, we do a positive EBIT but bear in mind, the refund of the tariffs. The [ propane ] launch, as we've talked a lot about is progressing. We are doing a lot of changes and the changes will continue both because of the -- how the sentiment in the market is changing and the use of AI, the use of and the hard competition that we see from Chinese players means that we need to do a lot of changes and it's affecting all parts of the company and the way that we actually are doing activities. We will continue to do a lot of market activities in the fourth quarter. So I cannot promise you the result of those, but I could say that we are working very, very hard and the team is working very hard in order to get our products in the hands of all the potential customers. We have a solid financial position to back up what we do, and we have a positive operating cash flow. Thank you very much.

So please ask questions if you have.

[Operator Instructions] The next question comes from Fredrik Reuterhall from SEB.

Question is regarding the tariff refunds. Do you expect anything more next quarter or this was one-off, so to speak.

This is one of the questions that I expected to receive. So thank you for that one. We have received absolutely the majority of it. It will -- if it comes anything more, it's quite tiny numbers, actually. But it might come some, but not the major ones.

Okay. That's good. You mentioned also that part of the growth in the Americas and EMEA was due to easy comparisons. But what is your perception of the inventory levels of your largest dealers? I mean, we say it's balanced -- or was the growth mainly due to restocking or was it the real demand behind.

It was a real demand behind. We don't see any major variations in stock.

And you touched upon it in the presentation here that you're really working on the cost base. And if I remember correctly, I think it was the profit warning in October, but last year, you said there was going to be a run rate of EUR 20 million roughly. That's correct, right? And now you are slightly below 300. And you communicated that the cost base is going to come up a bit more due to marketing spending. But would 20 is still valid going forward for 2027?