Profoto Holding AB (publ)

Hi and welcome to Profoto's Q1 Telco. My name is Amanda Åström and I am Head of Investor Relations. Today I have with me our CEO Anders Skedebark and our CFO Carl Van Holm who will start the presentation by presenting some highlights for the quarter.

Thank you Amanda. So we're here today to present the first quarter of 2024 for Profoto and Some key points then to start us off. Net sales decreased by 25% to 171 million CET, representing an organic growth of minus 25%. EBIT for the quarter was 34 million, corresponding to an EBIT margin of 20%. So despite the quite significant decline in sales, we managed a healthy EBIT margin, which we are somewhat satisfied with. Also, return on operating capital at 39% is still high, even though not quite as high as we've had in the past. So, all in all, a challenging quarter for us, clearly. On a more positive note, then, at the beginning of May, we made our first major product launch 24 months basically with the PRO-D3 product, which Anders will speak about a little bit more later on. So zooming in a little bit on the quarter, I think looking back also you can see that there is quite significant volatility across quarters for us. really how our business functions. So at the revenue of 171 million, still reaching a 20% EBIT margin, I think was quite good for us. Then talking a little bit more about where the sales decline came from. In recent quarters, we had some differences in demand. Demand has been weak generally in the market for the last two years for us, really. And over that time, there's been some differences across geographies. In the first quarter here, we can see quite even weak demand, and as we discussed before also, product introductions are really important tool for us to drive growth and get customers excited and get customers to make a decision to make a purchase. And with another quarter without the product introductions or court desk, that contributes to our revenue decline. Then perhaps more relevant to talk about in the specific quarter if you look at the trend rolling 12 months revenue has declined also for that period by 17 percent and the emit margin has come down quite a bit which is quite natural so even though we have a a sort of cost-flexible and asset-light business model. Of course, we do have some fixed costs, and it's hard to fully mitigate the 17% decline. But despite that, we still have an EBIT margin for the last 12 months of 23%. So below our target of 25%, but still a decent level, clearly. Operating cash conversion, again, a metric which is important for us with an asset-light model. We expect to have a high operating cash conversion, and generally we do. But there is quite significant variation here. So in the quarter, operating cash conversion was just 26%. In the previous quarter, 93%. So there is volatility. And the primary driver here is that we have some natural fluctuations in working capital, one. And then two, we also continue to invest quite significantly in R&D. And with a low profitability, that impacts cash flow a little bit more. Again, as I mentioned, we have an operating model that's asset light, which typically returns a very high return on operating capital over time. For the quarter or rolling 12 months to the quarter, 40%, which is still a very good number, but not quite as high as where we've been. Continue and then discussing the balance sheet. We have quite a strong balance sheet still with a positive cash position and a very low net debt to EBITDA. So the benefit with the strong balance sheet, of course, is that we can continue to invest in R&D and we can return capital to our shareholders as we communicated after the fourth quarter. We will make a dividend, hopefully, if we get the decision on that at the AGM today. So summarizing the financial perspective, We have ambitious financial targets, 10% organic sales growth, 25% to 30% EBIT margin. For the last 12 months, clearly below on the organic sales growth, but almost reaching the EBIT margin growth. And as we started with a weak quarter, but we do see light at the end of the tunnel. So we still feel confident with this financial target. Anders will now talk a little bit more about our business and what we are doing to change things around. Thank you, everyone, and we are over to you, Anders.

Good morning, everyone. Thank you for listening in today. Maybe we should change slide call. As you know, if you've been following us, we are premium position global niche leader. We sell our product to the very best photographers in the world. We have a very long history, a long line of profitable growth. What we focus on is the customer and to bring in new products to the market. And the whole organization is driven by entrepreneurial spirit. Next slide, please. To talk more about the market, we are the leader in lighting products for studios and professional photographers. And we are active in the, over time, growing image and content creation market. And we have the premium position in what we call the segment photography lighting solution. What we do is flash system, lighting system, And they're used by leading studios, leading brands and photographers all around the world. So we distribute globally and we have feats on the ground in major countries here in Europe. We have offices in North America and in Japan and in China, mainly doing sales. We also have a development office in Harlem, in Amsterdam, in Holland, outside Amsterdam, in Holland. So we focus on organic growth. We focus on high margins. This means that we need to invest a lot in innovation. It's also important for us to spend money on exactly what is important to the customer. So operational efficiency is our motto. So we really live after that. And this means that we outsource as much as possible and especially, obviously, production. And this also means that we do not have a lot of operational staff. Most of our staff are highly educated and we strive to only hiring the very best. Next slide, please. We have over 20 years of good growth and we could clearly see over the year when we launched groundbreaking products. our sales have been taken off. And here you can see in this slide, over the years, the Pro 11, A1, B1, and the D1. And we can see how our sales is changing over time when we do very active launches in this way. Next slide, please. We can also see that the large share of sales over time comes from newly launched products. We have a slight delay, sorry for that. So a large share of sales comes from new products and the last 12 months, 48% of the sales came from products that were newly introduced. Next slide, please. Obviously then, we are investing heavily in launching new products so we have and we have increased investments in research and development in product development and we do this in order to launch a lot of new products some are updated products some are groundbreaking technology-based products But last 12 months, we invested 105 million, corresponding to 14% of sales into new products. Over time, we believe that this should have a positive effect on the company, on the brand, and consequently also on the sales. Next slide. We are focusing our growth into three areas first of all the core light for professional photographers that is mainly for still photography secondly we have over the last 12 or 24 months invested heavily in workflow solutions for e-commerce studios and we are entering now the third area light call where we're launching uh groundbreaking super powerful led light and we're doing this in los angeles at the trade show cine gear and i'll come back to that so anyway uh we after the period now in in the second quarter in in beginning may we launched the pro d3 This is a proof of that our investments are paying off, that we're able to bring new products to the market. This is the first major product this year that we're launching. We have launched a couple of different light shaping tools already, and we will continue to do the same into the future. So the D3, let me cover that a little bit. This is positioned for high end studios, demanding high end studios wanting to do a lot of content creation to increase the efficiency of the studio. So to lower the cost per image, but also possibility to shoot excellent quality. So the lighting quality is excellent. on the Pro D3, which means that the large studios can create great content that really converts and do this really fast. And so far, the product, the selling is good. The product is well received, but it will take a while during the quarter before we see how good it really flies into the market. Next slide, please. So as I said, the 7th of June, we are exhibiting together with our dealer Samis at Cinegear at Warner Brothers Studios in Los Angeles. We will talk more exactly about the product uh at the the time of the launch but what we can say at the moment it's a super strong super powerful led that enables gaffers and director of photography to light scenes in a new way and we are focusing really on the easiness of use and and the quality of light for for this product so thank you very much I will also add to this, beginning after the summer, we are setting up a new organization for growth in North America, which Sarah Streed will take over as vice president for North America and also for global marketing, not only America, but for the globe. And she will be based in in Los Angeles and build the department from there. This has not a major, not a significant effect on the cost, but it will have a major effect on that. We're very close to the customers, not only for fulfillment production, but also we see that California is really the center of the world of photography, moving from slightly from New York to the West Coast in the US. So I'm very happy that Sarah is taking on this role and taking the lead in driving our sales and our brand, not only in the US, but also all around the world. Thank you very much.