Mips AB (publ) (MIPS) Earnings Call Transcript

Thank you. Good day and thank you for standing by. Welcome to the MIPS Interim Report Q3 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Max Strandwitz, CEO. Please go ahead.

Thank you, operator, and good morning, everyone. My name is Max Strandwitz, and I am the CEO of MIPS. And with me today, we also have our CFO, Karin Rosenthal. And we will take you through MIPS' Interim Report, third quarter of 2026. And if we start with the key highlights of the quarter, it was a strong quarter that really validates our strategy. We saw strong sales development with 59% growth in the quarter. If we adjust for acquisitions and FX, we had an organic growth of 24%. If we look at the year-to-date number, we see a net sales growth of 55% with an organic growth of 31%, which is also very much in line with our long-term ambition. We saw that the momentum was broad-based across all the categories and geographies. Europe and North America continued to develop strongly, while Asia continued its positive trend, as we have also seen last quarter. We see good demand for the recent acquisition, Koroyd, and its products. We have some new product launches reinforce the customers' interest in deepening their collaboration. The management team has been further strengthened through the recruitment of a new CFO, Marie Björkland, that will start in January. And we have also recruited a Chief Commercial Officer, Celine Flack, that will also start in January. And CCO is a new role or newly created role, and we are excited to explore also the opportunities there. We have already communicated that we reached a settlement 2nd of July regarding the legal dispute in the U.S. We did recognize the cost in the quarter, and that's the difference that you see, versus reported EBIT and adjusted EBIT. We see a good improvement in underlying profitability, a strong testimony of the scalable business model, and we remain confident in our long-term strategy and our financial target. In sport, we saw good development. It was a good quarter with 37% net sales growth. Adjusting for acquisition and for organic growth was 22%. Europe delivered solid growth while the U.S. market showed positive development despite softer market conditions. In Asia, the positive trend continues. And it's good to see that we now have really strong performance with growth in bikes for the 12th consecutive quarter in bike, which is of course fantastic and probably unmatched to see in our industry. But I think also with that, having reported three consecutive quarters or years of quarterly growth in the bike segment, we can now call the COVID unwind effects over. We see quite positive industry data from Germany. If we look at the number of bikes being sold in Germany, it's actually up 10% versus previous year. And for us, we continue to see Germany as a very strong engine for growth in Europe. And of course, the latest retail data that we see support that, and that is something that we also expect to continue. So with the good development we see in Europe for bikes, in the U.S. market, and also the positive development in Asia, we expect also the outlook to be quite positive and our opportunities to continue to generate growth in the sports category. In Moto, we see that the category continues to accelerate. We had good performance in the quarter with 116% growth, adjusting for acquisition and Forex. Organic net sales grew with 46% in the quarter, year-to-date is now at 74%, with an organic growth of 35%. We continue to see good development both in the off-road and the on-road subcategory, but it's good to see for the first time that also in absolute terms the on-road subcategory actually outgrew the motocross categories. It's really, really good to see that all the effects and initiatives that we have done within the on-road category is now starting to pay off. No change to the long-term outlook. We have a good opportunity to continue to grow in the category. It's also, you see a picture of Jeffrey Herlings that also won the MXGP, the GP World Tour, and became world champion. And we also have another member of the MIPS athlete team that won the SMX series in the U.S., Jorge Prado. So really good performance of the athletes that we have in our team, our athlete team in the motocross category. If we look at safety, we see of course that the Koroyd acquisition accelerates the growth that we see in safety. We really have strong increased momentum with a growth of 396%, and of course, if we adjust for acquisition and forex. The organic growth was 34% in the quarter. We did, together with Studson, launch the new SHK-2 industrial safety helmet. And the SHK-2 helmet is the development of the very successful SHK-1 helmet that has been extremely successful on the U.S. market. And the SHK-2 helmet focuses a lot on thermal regulation and, of course, thermal comfort and fit for the user. And it was launched during September and has been really well received on the market. The other thing that is unique is this is of course, Studson's first helmet, which is only having a full interior of the Koroyd solution. The previous one had, of course, both Koroyd and EPS. So really good to see that we have great ventilation in the helmet and, of course, a full Koroyd implementation. And we remain very excited about the category, no change in the long-term outlook. And we see a good opportunity to continue to grow in the category. During the quarter, we have also increased our investment in Quin, and in conjunction with our original investment, we obtained an option to purchase another 5% at the predetermined valuation. We did exercise our option to acquire an additional 5%, which moves the MIPS ownership from 25% to 30%. And for us, real world user data is a key component in our leadership in advanced helmet product development, complementing our already existing world-leading capabilities, both when it comes to computer simulation, but also, of course, complementing our state-of-the-art test lab. And with combining MIPS' test facility with real life data, of course, we can create an ecosystem of data which is very difficult to match in our industry. I believe the one that has access to the best data can take the best decision. So really excited about that investment. If we then look at the development in our different categories in sport, we saw 37% growth in the quarter, 22% organic. If we look at year-to-date, the organic growth number in sport is 30%, so really solid growth there. In Moto, we saw 116% net sales growth, 46% organic, and if we look at the year-to-date organic growth number, we are at 35%, so really strong growth in that category also. And it is accelerating, as I already said. And in safety, we are growing really fast. And really excited about the new launch of the SHK-2 helmet. We had an ambition of reaching 100 million SEK for the year in the safety category. And we are already at 77 million, so I think we have a very good chance of getting to the 100 million milestone. And with that, I hand over to Karin.

Good morning, I'm Karin Rosenthal, CFO of MIPS, and I will take you through the financial part of the presentation. We saw good development in the third quarter with an increase in net sales of 59%. The Koroyd acquisition contributed with 30% and FX had a positive effect of 6%, leading to a net sales increase of 24% organically. Gross profit increased by 53% and we saw a gross margin of 72.7% versus 73.6% last year. We also saw good underlying improvement in profitability. Adjusted EBIT increased by 76% with an adjusted EBIT margin of 42.7% versus 37.5% last year. OPEX, including other operating expenses, was impacted by legal costs of 56 million SEK year-to-date, whereof the settlement cost was 32 million SEK. Operating cash flow for the first nine months was 128 million SEK. So looking at the financial KPIs, 31% organic growth, 43% adjusted EBIT margin, and operating cash flow of 128 million SEK. If we then look at the balance sheet and cash flow, we have cash and cash equivalents of 141 million SEK. We paid out dividend of 66 million SEK in April, corresponding to 55% of net earnings. Since the acquisition of Koroyd last year, we have a revolving credit facility, and that's utilized of 230 million SEK at the end of September. And then net sales versus adjusted EBITDA amounted to 0.13 times at the end of September. And operating cash flow in the quarter amounted to 48 million SEK. With that, I hand over to Max.

Thank you, Karin. If we then summarize the quarter, it was a strong sales development with 59% growth in the quarter, organic growth at 24%. If we look at the year-to-date, we are at 31% organic growth, so well in line with the ambition. Momentum was broad-based across all the categories and geographies, we did gain market share in all our markets. The integration of Koroyd is working really well. The management team has been strengthened through the recruitment of a new CFO and appointment of a CCO, and both of them of course will start in January. Good underlying improvement in profitability adjusted within the quarter was 45% and we remain positive on our long-term outlook and the delivery of our financial targets. And I also want to send a big thank you to Karin. This will be your last quarter, of course. You have been with us for 24 consecutive quarterly reports. Of course, fantastic, well done and so on. And it has been a pleasure having you on board. And with that, I open up for questions.

Thank you. [Operator Instructions] We are now going to take our first question. And this question comes from Adela Dashian from Jefferies. Please go ahead.

Good morning, Max and Karin. A few questions from me. Firstly, just on the organic growth that you reported during the quarter of 24%, it was somewhat below expectations. Was it in line with your expectations or are we reaching some sort of like, I don't want to say normal, because I know that the answer is going to be no. But did you expect a little bit more on the organic growth level?

Yes, I mean, long term we are expecting 30% organic growth and you will see ups and downs. Last quarter we had 42%, this quarter 24%. So that of course, when you are a fast-growing company like MIPS, you will see fluctuations like that. That's normal, I would say, and something we have always seen. I would say, that the MIPS performance was a little bit lower than expectations, but at the same time the Koroyd performance was a little bit better than expectations. Actually if you look against consensus, we were spot on, so I think you have swings both ways. I don't see anything in the quarter that expects or expect us to have a normalization rate of 24%. We are still quite confident on our ability to deliver more than 30% organic growth, which is also in line with our long-term target. So nothing in the quarter. We had a little bit tougher comparator in Europe. If you remember last year, we grew actually 80% organically in Europe last year. And of course, that's quite a tough comparator to meet.

Right, that's clear. Thank you, Max. And then moving on to safety, I believe there's been new standards in the U.S. related to type 1 and type 2 helmets introducing new designations. Is this something that could drive meaningful revenue for you there?

Yeah, I think, I mean, there is of course the new ANSI standard which I think is the one that you refer to. Of course have a much clearer definition on what a type 1 helmet and a type 2 helmet is, but also putting a lot more requirements on what the helmet actually should be able to do and so on. So of course as soon as there is any improvement in terms of regulation and standards, normally you see bigger demand for a better quality helmet and of course the new standard as such has helps that or supports that. And then in terms of MIPS, of course, they will probably have a little bit of a positive effect for that because there is a demand for better helmet. When it comes to introducing rotation in the standard, that has not yet happened, but you see in the standard, is actually a paragraph saying that they are looking into rotation. And of course, when that will be announced, then of course it will be a bigger impact from MIPS. But for sure, it's a step in the right direction. Short term, good for Koroyd. Longer term, I expect also positive development for Koroyd. MIPS in that category when it comes to rotational standard, sorry.

Great, thank you. On profitability, as you say, better than expected here despite the gross margin decline. Was all of that related to Koroyd, the mix?

There is an impact of course integrating Koroyd into our numbers. The gross margin in the quarter was down with 1.9%. There is a small product mix effect also. And we also had when it comes to our revenues stemming from services. Of course, we saw really strong growth in the quarter from that, and that has also a minor mix effect. So nothing that we didn't expect to come. We have a very strong margin, but of course, implementing Koroyd, which has a little bit lower margin, could have that kind of mix effect.

And then lastly on the settlements, in the third quarter was slightly lower, a couple of million lower than anticipated. Is this completely over and done with now? No more lingering into Q4?

Yes, the cost has been recognized in Q3. I think it's also important that in total the costs were 37 million SEK, but it's recognized under two different line items. One is under other operational income and expenses. You also have legal fee regarding to creating the settlement agreement which you find under administrative expenses. So we were actually a little bit higher but it has to do with the revaluation and the strengthening of the dollar that you saw in the end of the quarter. But on a like for like comparator, it was actually spot on what we expected.

Great. And then maybe lastly, lastly, and more importantly, congratulations, Karin. You will be missed.

Thank you, Adela. Thank you. We are now going to take our next question. And this one comes from Emanuel Jansson from Danske Bank. Please go ahead.

Good morning, Max and Karin, hope you can hear me. Really good organic growth across all regions as you mentioned, Max. And I think very few companies can match that in this environment, and you have previously highlighted product development, low inventory levels in the channel and increasing market penetration as growth drivers. I wonder if this is still the right way to think about the growth or has the balance between those drivers changed?

No, I wouldn't say that they have changed materially. The premium market, if you look at the U.S. market, has always been working really well. What we have seen and starting to see is that the lower part of the market is coming back, maybe a little bit quicker than we expected. Europe, of course, driven by a lot of the performance that we see in Germany and, of course, with the increased momentum that we see in the German market, of course, it's also easier to grow. But in the end, our growth is mainly from gained market share and, of course, increasing the penetration with our customers. And, of course, that journey will continue for a couple of more years.

Perfect, that's very clear and I think also that you highlight that you're quite, at least that's my assumption, that you're quite confident in a strong finish to the year. I think it's possible to explain a bit why I think the Q4 might be seeing some stronger organic growth and what you see ahead of the 2027 season, bike season for example?

Yes, so first of all, I mean, our long-term ambition is to stay above 30%. We don't see anything in Q4 that would deviate from that. And of course, if you look at comparator and also the composition of the quarters, Q3 was a little bit tougher quarter in terms of that. But also Q4 is normally the biggest quarter of the year. And of course, with the seasonal variations, we see a much bigger quarter in Q4 versus the other quarters that we see. And then when we go into 2027, we have the exact same ambition level to grow more than 30%. When it comes to the bike market, the European market, we expect to continue to grow quite quickly. We see especially Germany doing really, really well. We see that fuel prices, of course, is promoting that you leave your car at home and it promotes a lot of commuting, but we see that biking in general increasing quite a lot and also looking at the German statistics with 10% more bikes being sold versus previous years. A lot of brands are very bullish on the American market and they expect it to come back already in 2027. I'm not sure. I think it will be still a little bit a challenging market, a lot of inflation on the market, that long-term interest rates are quite high and so on. Our assumption for the U.S. market that it will basically be as it is today. If it helps us a bit, I'm super happy, but I think it's much better to be a little bit more cautious on the U.S. market and rather be surprised than plan for some way. Then, of course, you have Asian markets, which actually bounced back a lot earlier than we expected. Chinese consumer market has been a little bit depressed through the years, but we still see, of course, great opportunities to grow, and the Asian market has been strong than we expected throughout this year and we also expect it to be quite strong during next year.

Perfect, thank you. Looking at safety, your full year indications implies around 20 million SEK in turnover from safety segment in order to reach your ambition for the full year, which is then below the 30 million SEK delivered in Q3. And given the demand we have seen, for example, within Studson and Koroyd equipped helmets, is there anything in seasonality or shipping timing that would explain that step down? Or is there room to exceed the indication or ambition for the full year?

Yes, I think first of all, we should start by delivering the 100 million SEK, but in terms of historic level, Q4 has normally been the biggest quarter in safety of the year.