MIPS AB (publ)

Good morning, everyone. My name is Max Strambitz. I am the CEO of MIPS. And with me today, I also have our CFO, Karin Rosenthal. We will take you through the Q3 interim report presentation of 2023. And if we start with the key highlights of the quarter, we did see a soft quarter with a decline in sales of 32%. If we adjust for currency effect, organic growth was down 33% and the soft performance that we have seen is mainly from the bi-category, sub-category and moto as explained also in the report. We have seen a good start of the fourth quarter in terms of orders received and the indication from our customer in the industry is also that the markets will recover in 2024. There is still some short term uncertainty in the retail environment. I think you all have seen the announcement from Cigna Sports, which is the biggest retailer in the world, which is now in an insolvency process and so on, and quite a lot of disruption in the whole retail environment. But what we have in our control looks good. And like I said, we are at least off to a good start in Q4. Then we are also very happy with the announcement we did of the two strong partnerships in safety. Of course, the first one being the global brand MSA, which is one of the biggest players in the PPE industry. And then, of course, lift safety, really important building blocks for the success of the US market. We also see good improvement in penetration and awareness in the end market to have just received recent surveys. Despite the very challenging market environment, we are gaining shares and gaining penetration in all our key channels. And we remain confident in delivering on our long-term strategy and our financial targets. In sport, We are still impacted by inventory adjustments. We did see a challenging quarter again in sport with a decrease of net sales of 29%, mainly explained by the soft sales development that we saw in the beginning of the quarter. We did see an improvement through the quarter and we actually see positive momentum in September. There has been very erratic sales development in the US end market, which has created some uncertainty on short-term outlook in bike. Customers still plan for a major recovery in 2024. And despite the soft sales performance, we see positive development, like I said, on both global awareness, so more people are aware about the MIPS brand and what we do, And we also see that the penetration, despite, of course, soft sales numbers, we are gaining shares on all the key channels. And we also see a very positive outlook for bike going forward. In Moto, we have been disappointed by the performance in Moto. We see slower markets. We saw soft development in the quarter with a decrease of 68%. We see a much more cautious retail environment, especially in our important US market. And we expect that the coming one to two quarters, we see soft performance in Moto. We have launched several initiatives to improve sell-through and awareness, and of course, also to drive higher volume in the category. We haven't changed our view on the long-term outlook, still strong interest for MIPS in the category. supported by new partnerships and models being launched during the coming quarters. If we then turn to the next page and we go to the slide with safety, we continue to see strong development in line with ambitious plans we have. We continue to see good interest both in the US and the European market. We did launch the two new partnerships in connection with the two big fairs of the year. This week there is both the NSC in New Orleans in the US market and also the biggest industrial fair of the year, or actually it's only every second year, A plus A in Düsseldorf, where we of course participated in both of them. We always have a requirement that if a brand shows a MIPS product, we always need to do an announcement first. And of course, both of these two brands showed the MIPS technology. And of course, therefore, we did the announcement. So we will do launches with these brand coming quarters. Really exciting to have MSA on board and with them on board. Our total platform for within the safety category is somewhere 30 to 40 percent of the addressable volume. So really a strong platform for growth and really looking forward to the long term delivery in the safety category. If we then go into the next slide and we look at an investment, we did an exciting investment in sensor technology. It's all aligned with our strategy of doing more in the helmet. It was the first strategic investment towards exploring the opportunity in the sensor technology market. We have evaluated a lot of different technologies and we consider the QUINT technology to be the leading in the sensor technology market. The technology will enable us to gather a lot more information regarding incidents but also about consumer behavior, all very important steps in delivering the MIPS vision, ambition and strategy. And also, of course, a great way of becoming a lot more consumer centric. If we then look at the category development, we did see soft performance in sports down 29 percent in the quarter. Most of there is several activities to boost the performance again and start delivering growth. And in safety, we are making great progress and, of course, happy with the performance there. With that, I hand over to Karin, our CFO.

Good morning. I'm Karin Rosenthal, CFO of MIPS, and I will take you through the financial part of the presentation. We saw soft development in the third quarter with a decrease in net sales of 32% and adjusting for FX due to a strong dollar versus SEK. sales decreased 33% organically. Gross profit decreased with 28% and we saw a gross margin of 73.1% versus 69% last year. The increase was due to product and volume mix. In OPEX, we continue to invest in our strategic priorities. EBIT was down 60% to 15 million and an EBIT margin of 19.5%. and operating cash flow of 12 million in the quarter. If we look at our financial KPIs, minus 33% organic growth, 19% EBIT margin, and 12 million in operating cash flow. If we then turn to next page and look at the development for the first nine months, net sales decreased with 42% and adjusting for FX, sales decreased 44% organically. Gross profit decreased 42% and we had a gross margin of 71.1% versus 72% last year. The decrease was due to higher share of fixed COGS as an effect of decreased net sales. In OPEX, we continue to invest in our strategic priorities, marketing and R&D. EBIT was down 74% to 53 million and an EBIT margin of 20%. We had a negative operating cash flow of 21 million due to tax payments relating to the 2021 profit. So looking at our financial KPIs, minus 44% organic growth, an EBIT margin of 20% and minus 21% million in operating cash flow. If we then turn to next page, we are now on page 10, balance sheet and cash flow. We have a strong cash position with cash and cash equivalents of 371 million. And just to remind you that MIPS don't have any loans. Operating cash flow in the quarter amounted to 12 million. We made an investment in Quinn of 80 million in the quarter. We paid out dividend of 144 million in May. We had a new share issue due to exercising of warrants amounting to 94 million during the second and third quarter. And we had an equity ratio of 89%. Over to you, Max.

So if we then summarize the quarter, it was a soft quarter driven by weak markets, still influenced by inventory reduction and a very soft consumer sentiment. We do see good development in safety with strong partnership announced in October. We see strong trends in awareness and market share development despite the challenging market conditions that we see. And of course, since we believe that this is only short term, we continue to invest behind our strategic priorities to make sure that we deliver on our long term strategic plan. And we remain confident to deliver on our long term financial targets. With that, the official presentation is ending. And of course, we open up for questions.