Profoto Holding AB (publ)

Hi and welcome to Profoto's Q3 presentation. My name is Amanda Åström and I am Head of Investor Relations. Today I have with me our CEO Anders Hederberg and our Acting CFO Linus Malmstedt. I will first hand over to Anders who will start off by giving you some highlights for the quarter.

Welcome everyone. Thank you for joining. As you saw in our presentation, we say that we still have a cautious market climate or business climate, or that the customers are actually hesitating, still hesitating to take the decisions to buy new flash, new lighting equipment. We are continuing, though, our work on investing hard in or a lot in product development, and this shows in the figures. Our net sales. we dropped by 4%, but organically the sales decreased with 1%. The difference here is the currency, the value of the currency over the period has changed. Our adjusted EBIT was 30 million crowns, which is down 5 million from 35, corresponding to an EBIT margin of 18%. One of you that are following Profoto, you know that our Our target is 25 to 30%. I would like to say this is just a quarter. This is not for the full year. EBIT was 39 million after some changes from the adjusted EBIT, which is 24% of sales. Our return on operating capital was 32%. Okay. As I said, we are continuing to increase or change or make our investments in new products. We are focusing mainly on three areas. Number one, we are launching new products. We are developing new products for our core. That is live or professional still photography. One example was not during this quarter, but during last quarter when we had a successful launch at the end of that quarter. Second, we are continuing to enhance our offering in workflow solutions for large studios, large content creation studios, mainly for e-commerce. Thirdly, we are investing in light for film production. And we launched or we showed our L1600D Cinegear in the end or in June this summer. We will start to ship that product in the end of the quarter, in the second half, actually, of December. We will have minor shipments, which will affect the fourth quarter somewhat, but not a lot. During the quarter, next slide, please. During the quarter, we have focused a lot on bringing new accessories, new light shaping tools to the market. We launched some of the products called Magnum, Reflector White, a series of white reflectors, Magnum Telezoom and Zoom reflectors. In addition to this, next slide, please, we launched soft boxes, two types of soft boxes, one octa silver and one three by four foot silver box. And you see some example of that in the image to the right. Lastly, we also launched a new kit for the A2, which has been very successful. A2 combined with a connect so that it's easier for the customer to buy that kind of product. Then you could jump to the next slide and I will hand over to you, Linus. Welcome, Linus.

Thank you. Thank you. This is the slide we have presented before. As you can see, during the last quarter of years, the number of major launches has been somewhat lower than the long-term trend. As you know, we are investing heavily in R&D with an expected number of launches during the coming period. On the next slide, this is a very important slide, as you can see. The R&D spend has more than doubled during the last years. And what we now expect is to see a level of stabilizing this level in general spend. Next slide, please. And in general, you can see that we have seen a cautious market with an underlying organic growth of minus 1%. We just commented on the margin. Sorry. We were talking about the margin and the general market trend and the margin development.

So the margin, as you see, is down and it's basically dependent on that the sales is not according to the level where it should be. And this is the main reason why the margin is only coming in at 18%. Yeah.

And as you also said, we have an earn-out release, a revelation of the earn-out liability of 9 million, which has impacted the EBIT. So the adjusted EBIT is 30 compared to the non-adjusted of of 39. And if we look at the 12-month period, we see that the role in 12 months is stabilized in our trend of slightly above the 20% margin. And what we have seen during the quarter is that we have seen a soft market in almost all geographies, but in the U.S., We had a slight increase, and that's depending on some product-specific shipments of some products, especially in the US, which has had a positive impact. But in Asia, we've also seen a decline of around 20%, which is mainly affected by a sharp decline in China. And this is just to see that the return on operating capital is affected by our R&D spending. And as you know, we have a very solid balance sheet. We have a net debt to ABTA of around one time. So we have a very solid balance sheet, which is important going forward. And as we have stated, I mean, we have a long-term target of a bit more, you know, 25 to 30% and organic growth of 10%. And during the last quarters, we have not really reached that, but we are really committed to, to reach this target going forward.

Great. So now we will open up to questions.

If you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question please dial pound key 6 on your telephone keypad. The next question comes from Marcella Klang from Habdelsbanken. Please go ahead.

Good morning. A couple of questions on the upcoming launches. Can you talk about the potential in terms of profitability impact from the upcoming launches? What kind of volumes are you expecting? Is this backed by pre-orders? How much can you say about what you have in your books already by now?

Good morning, Marcela. As you know, we do not give future forecasting for next quarter. But what we can say, or for the coming year, there will be launches in the future and that you can see that especially on on the slide that that um leno showed concerning the investments in r d our r d projects are 24 to 36 months so it could and and sometimes you cannot say exactly when they will take in but we we look for we are looking forward to an increased activity in the market we are Concerning pre-orders and how we do sell-in, we, as you know, we have an indirect business model where we sell to dealers all around the world. So we try to sell in to dealers so that they are stocked up and ready to ship products at the time of the product launch. So there are You cannot and one of the things is also when you look on mice and the second slide I had We are investing depending on what kind of product we're launching that is if we're launching it like in the core market where we already have and we are replacing an old type of flash we will see less Effect on the figures, but we are but we will see some some positive effect but less positive and in comparison with if we are launching a product that is brand new to the market, and then you will see a clear growth in the figures. I cannot comment on volumes. I cannot comment on the specific effect and give you any guidance on that. That will be dependent on when we are launching and what kind of product and also how successful. We have to wait with that until the next quarter, which we will produce and we will

show in the in when is that amount in february 12th of february sorry for that marcella i guess then we'll just have to wait uh one more one more quarter in terms of uh you mentioned the r d projects uh two to three years um are you also looking into uh completely new areas similar to video lightning and so on or more new versions replacement of products from your core market yes so we are definitely investing in our core market by expanding our offering and of

product for still photography. This is what we call the core part and the black part of slide number. It is slide number four in the presentation. And the upper part, I would say light for professional photographers. So we are investing and you will see products coming in that area. The Pro D3 that we launched in the last day of second quarter this year is exactly that, which is which is enabling studio photographers to, in a more cost-efficient way, produce great images by focusing on lighting. So there will be more products of that sort, both replacing and both also adding to the full product line. Secondly, we are, as I said, we are investing in light for film production, where we launched or we showed L1600D, which we will start to ship, which is the plan in the end of December. So we will have some units sold into the market. Here we are focusing heavily on most energy, most light per kilo, per size of the product. We have a smaller light easy to handle product that will enable the gaffers and the director of photographer to set the light in a more creative way and focus on creating great footage in that market. We are doing that and we are keeping on investing in other products for that market too, but I cannot say when exactly we will launch those. Thirdly, And we have said we have the same business model for, I should say, also for selling lights to the core market as we will have for selling LED lights for the film market, for the cinema production market. Thirdly, we are focusing a lot also on taking care of the large content creation studios, mainly for ECO, that are producing both still photographs as well as as video footage mainly for selling products on the internet. That is different kinds of Ecom studios. Here we are approaching the customers more directly and hence we are also all the time developing our workflow solutions to adding on new functionalities and new kind of solutions to solve the critical problems or critical issues in the e-comm large volume content creation studios. So we're doing all of this of different kinds and focusing now more on launching products than we did before.

And can we talk about the competitive landscape? Do you have more fierce competitors right now or... Or is it less demanding? What is happening with the challengers?

Well, I would say that the landscape is very similar to as it always have been. I can see somewhat more tougher in the LED area, like for lower end of life for film production, especially from Chinese manufacturers. So it is somewhat, and you should also bear in mind that this area is new to us. We don't know the customer as well, even if we already know quite a lot of these kind of customers in that area. And we are trying to take the position of the premium brand in lighting for film production. the final question regarding your establishment in in la in los angeles how is it going sarah who's the the the manager there she's been there since august so it is going great we are and it is too early to judge but we already now know that this is very important to us we have a much we have our toes in the water, so we are there in the market, we talk to the customers, we do activities, and it is very good, but you can't see that really in the figures.

Thank you, that's all for me.

Thank you. Great, and I have not received any questions per email either. So let us round off today's telco by reminding you of our new end of year report date, which is the 12th of February next year. Thank you for joining us this morning.

Thank you.