Pierce Group AB (publ)

Welcome to the Pierce Group Q2 2024 presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to the speakers. CEO Joran Dolin and CFO Frederick Eidstrom. Please go ahead.

Good morning. This is Göran Dahlin, CEO of Peers. And with me is Fredrik Edeström, our CFO. Before we go into the results of the quarter, I would like to spend a few minutes on Peers. Peers is a leading e-tailer in the European market for gear parts and accessories for motorcycle riding. The total European market, which in 2021 was estimated to some 100 billion SEK, is still a fragmented market and mainly served by physical retailers, while the market is well suited for e-commerce. Peirce is the clear leader in the off-road segment and one of the larger e-tailers in the on-road segment. And Peirce is the only true pan-European company in the industry with a local presence in 16 markets. We have a uniquely attractive assortment where we combine a wide range of top brands with the largest range of own brands in the market. We have a turnover of 1.5 billion SEK and 330 employees across Europe. To the right, you can see some basic information about peers. We have two-thirds of our sales outside the Nordics. Almost two-thirds of our sales are off-road, one-third on-road. And then we have 5% other, which is primarily SLED. And our own band share is above 40%. Page five, please. So going into the quarterly report for Q2. During the second quarter, primarily in the beginning of the quarter, we experienced a more positive consumer sentiment versus last year. We also saw effects of our actions to improve our offering, availability, pricing, lead times, etc. This resulted in that our sales grew versus the same period last year with 3%, 2% in local currencies. Our margins continued to improve versus last year with 2 percentage points. The improved margins were mainly the result of a combination of increased prices and lower shipping costs. Our adjusted EBIT improved significantly from 6 million SEK in Q2 2023 to 17 million SEK in Q2 2024. We have a very solid cash situation with 350 million SEK driven by continued focus on stock efficiency as well as increased focus on slow moving stock. We though expect some somewhat increased stock levels going forward in support of seasonal fluctuations, the need to ensure product availability as well as capturing future growth opportunities. Geopolitical uncertainty we feel has slightly increased even further, while the market outlook remains uncertain. And we think that this influenced the end of the quarter for us. Next slide, please. Some of our KPIs that we follow closely, if we take to the left, We have the share of private label. We have a very strong own brands offering that we intend to strengthen even further. Our LTM private brand share was 41% compared to 40% in Q4 last year. So we continue to have a strong position in with our private label. Then we follow the Trustpilot scores, which we use to track customer satisfaction. They continue to be on a very high level across Europe. As you can see, 4.3 out of 5.0. We continue to drive improvements in the customer experience. We have, for example, implemented a more generous approach to claims, and we have made many improvements to take out customer pain points, apart from improving basics such as assortment, lead times, pricing, etc. And last Wednesday, we also launched, or this Wednesday, we also launched our first ever customer loyalty program. We believe all of these things should influence our customer satisfaction and retention positively going forward. Next slide, please. As you can see here from the chart on the left, the active customer base is down versus the same period last year, despite increasing revenues. The downward trend is, however, flattening out, and we're working hard to get back to growing our On the right hand side, you can see that the average order value continues to rise, which is offsetting the lower order volumes. We have grown the average order value primarily due to price increases, but also because we're selling more high ticket items such as motorcycle gear. I will now hand over to Fredrik.

Thank you, Johan. Good morning. This is Fredrik Hedeström and I'm the PIERCE CFO As Johan mentioned, we have continued to grow also in the second quarter this year. During the second quarter, our revenues grew with 3% or 2% in local currencies. We see variances between our segments, with off-road having higher growth than on-road, and also between the different countries in Europe, where we, for instance, see strong growth outside the Nordics in off-road and in the Nordics in on-road. The growth mix is in line with our strategic pillar to grow off-road and to achieve the absolute leadership in the off-road segment, whereas we seek profitable growth in the on-road segment. We have during the second quarter continued to improve our margins of the variable cost versus previous year. This is mainly driven by increased prices to customers, lower in-freight costs, and a reversal of our obsolescence provision of 3 million SEK in the second quarter. Variable cost share was further improved versus the same period last year. The improvement can be seen in the profit after variable cost that has increased in the second quarter with 2.7 percentage points versus last year. During the quarter, our adjusted EBIT improved from 6 million SEK to 17 million SEK versus previous year, and this was driven by the improved profit after variable cost. Our overhead costs were more or less flat versus previous year, and they were negatively impacted by underlying inflationary trends, FX effects, mainly the weakening of the Swedish krona versus the Polish slotti, and costs associated with execution of our strategy to improve our tech stack our operational efficiency program which was launched launched in 2023 however delivered in line with expectations and successfully mitigated the majority of these costs looking at the gross margin trend to the left we see that our gross margin remains higher versus last year with two percentage points. The positive development has been driven mainly by price increases and lower shipping costs but has also been positively impacted by release of obsolescence provision in the recent quarters. Gross margin decreased slightly in Q2 2024 versus Q1 and this was mainly due to the larger reversal of the obsolescence provision in Q1 that impacted the gross margin positively. As you may remember, in Q3 2023, we made an extraordinary provision for slow moving stock, which impacted gross margin negatively with 12.1 percentage points in that quarter, which can also be seen in the graph. Shipping costs in relation to revenue is one percentage point lower in Q2 than one year ago, and on the same level as in the first quarter this year. This is partly due to our focus on selling off overstocked inventory with higher associated in freight costs. With the current geopolitical situation, the uncertainty connected to shipping rates is high, and during 2024, market shipping rates have been higher than in 2023, especially in the second quarter. But they have also been more volatile. There is a risk for potential increases and more volatility in the coming quarters due to the ongoing situations in the Red Sea region and other and due political situations we are monitoring this closely and our teams are also working actively with a diverse toolbox of possible mitigations as mentioned a few slides back opex has been impacted negatively in the second quarter versus previous year by underlying inflationary pressure that is salary and cost increases the FX effects, as well as the execution of our strategy to modernize the tech stack. As mentioned, the outcome of the restructuring program is, however, in line with expectations and has mitigated the underlying effects. Networking capital continued to improve in the quarter. It decreased from the previous quarter and with 189 million SEK compared to one year ago, of which inventory accounts for 152 million SEK. The reduction is mainly a result of focus on stock management initiatives and efficiency, as well as improvements resulting from our new operating model and ways of working. The adjusted assumptions for the inventory provision from Q3 2023, of which some have been reversed, have also had an impact. We do, however, expect somewhat increased stock levels going forward in support of seasonal fluctuations and to ensure product availability and capture growth opportunities. Our financial position remains strong and at the end of the quarter we had 350 million SEK in net cash and our equity is on a high level. I will now hand back to Göran again. Thank you Fredrik.