MIPS AB (publ)

Good day and thank you for standing by. Welcome to the MIPS Year End Report 2023 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To whisper your question, please press star 1 1 again. Alternatively, You may submit your question via the webcast. Please be advised that today's conference is being recorded. I will now like to hand the conference over to your speaker today, Max Strandvits, CEO. Please go ahead.

Thank you, operator, and good morning, everyone. My name is Max Strandvits, and I am the CEO of MIPS. And with us today, we also have our CFO, Karin Rosenthal, And we will take you through the year-end presentation of Q4 2023. And if we start with the highlights of the fourth quarter, it was a soft quarter with a decline of 15% in net sales. If we adjust for currency effect, we saw a decrease in organic growth of 13%. We did, however, see quite a trend change versus previous quarter with growth actually in the bike subcategory. However, that was mitigated or offset by restrained ordering in snow. And we also see that the challenging situation in most of that we have seen in the last quarter remains. We continue to see positive momentum in orders received, and we see also a very high customer activity. And for you that are into the detail, you also saw that the project revenue increased with 30% in the quarter. And that means that we're still having a very high customer activity and implementing more helmets with MIPS on the market. And we haven't changed our assumption of recovery in 2024. There is still a short-term uncertainty, especially in the retail environment when it comes to the e-tape. We have seen a lot of impact from the internet stores and also Bergfreunde in the industry. Of course, MIPS doesn't sell to them directly, but of course, things are happening in the industry and that creates some turmoil. So far, very little impact from the Red Sea crisis. We will of course follow that closely, how that will develop going forward. As we see that this is a temporary challenge that we face at the moment. The board is proposing an increase in dividends to six Swedish crowns per share, which is an increase versus 550 the year before, and it corresponds to 249% of net earnings. And we remain confident in delivery of our long-term strategy and also our long-term financial target. If we look at sport, we did actually see growth in bike in the quarter, a little bit of a hesitant behavior in snow. It was a challenging quarter in sport with a net decrease of 10%, but that's fully explained by soft snow category back to growth again in the quarter. The bike subcategory is progressing well. We continue to see a positive order momentum and our previous assumption of recovery in bike remain. I think it's also important to understand that when we look at the bike category, it's not that we see that the bike market will all of a sudden start to grow. What we are reflecting in our assumption is that in 2024, We now see that the inventory levels have normalized. We see that our customers are starting to buy from us again instead of eating of their inventory. And of course that will have a direct effect in our P&L and of course will cause our net sales to increase. And that's really, really important to know. we do see more careful ordering in snow despite that we saw a very strong start of the season especially on the european market and of course inventory levels in snow and winter sports at the moment is very low i think anyone that wants to find their favorite helmet at the moment will probably struggle because of course there is a lot of out of stock what we see that the industry is a bit careful on is of course to do the repeat ordering for the season. No one wants to take the risk of carrying any stock over to next season. And we are still very positive on the long-term outlook in the sport category. We see the soft performance continuing. We saw soft development in the quarter with a decrease of sales of 66%, which is, of course, disappointing. We see, again, a more cautious retail environment, especially in the important US market. We do expect that the soft performance will remain near-term. We have launched several initiatives to improve sell-through and awareness of MIPS in the category. still see that it will take one or two quarters before it has the full effect, but it really starts to work. And no change in the long-term outlook, strong interest for MIPS in the category. And that of course is supported by both new partnerships and that we are launching more models on the market coming quarters. In safety, we continue to see strong development in line with our ambitious plan. We see good momentum and we are following the plan that we set up both in terms of the number of models but also the number of brands that we launched. We continue to see great interest from both the US and the European market and especially the US market has worked really well for us. We also see some government activities where they are Really probing for having better helmets on the market and also really pushing the conversion into type 2 helmets, which is normally better helmets on the market, which is of course beneficial for the launch of the MIPS technology into that segment. We did launch six new models at the large US trade show World of Concrete, which means that we have now in total 21 helmets on models on the market equipped with the MIPS technology. And of course, we have a very strong platform now established in the safety category. to make sure that we also deliver on our long-term plan. With that, I will hand over to Karin that will talk a bit on sustainability and the financials.

Good morning. I'm Karin Rosenthal, CFO of MIPS. And if we look at our performance in the sustainability area, we saw great delivery in 2023, where we met our key sustainability targets. We delivered an emission reduction of more than 20% per product sold during the year, and we are ahead of our science-based target ambition. We performed third-party audits according to our targets to strengthen the alignment with UN Global Compact. Our conversion program to use recycled polycarbonate was fully implemented in our most sold products. If we then look at the development of net sales in our three categories, in sports, we saw a decline of minus 10% due to softer performance in the snow subcategory, and we saw growth in the bike subcategory. Year-to-date, the decline was 37% in the category. In moto, we saw a soft performance of minus 66%, for the quarter and minus 53% for the full year. In safety, we delivered a small growth in the fourth quarter and 181% growth for the full year. If we then look at our financial performance in the fourth quarter, we saw soft development with a decrease in net sales of 15% and adjusting for FX due to a weaker dollar versus SEC, net sales decreased 13% organically. Gross profit decreased with 17% and the gross margin of 70.2% versus 72.3% last year. And the decrease is due to an increased share of implementation revenues. In OPEX, we continued to invest in our strategic priorities. EBIT was down 27% to 17 million with an EBIT margin of 18.8%. And operating cash flow of 31 million in the quarter. So if we look at the financial KPIs, minus 13% organic growth, an EBIT margin of 19%, and 31 million in operating cash flow. If we then look at the development for the full year, net sales decreased with 37% and adjusting for FX, sales decreased with 39% organically. In OPEX, we continued to invest in our strategic priorities, marketing and R&D. EBIT was down 69% to 70 million and an EBIT margin of 19.7%. We saw operating cash flow of 11 million versus 236 million last year due to decreased earnings in 2023 and paid tax in the beginning of 2023 due to high earnings in 2021. If we look at our financial KPIs, minus 39% organic growth, 20% EBIT margin and 11 million in operating cash flow. If we then look at our balance sheet and the cash flow, we have a strong cash position with cash and cash equivalents of 408 million. And just to remind you that MIPS don't hold any loans. So operating cash flow in the quarter was 31 million. And the board proposes a dividend of 6 sec per share versus 5.5 sec per share last year, corresponding to 249% of net earnings. And an equity ratio of 89%. Over to you, Max.