RVRC Holding AB (publ)

Thank you, operator. And good morning, everyone. And welcome to this conference call where we will address the report for our first quarter of the financial year 2024 and 2025. Our financial year starts 1st of July and ends the 30th of June. My name is Paul Fischbein and I am the CEO of Revolution Race. And with me for today's conference call, I also have the company's CFO, Jesper Alm. For those of you who are not familiar with Revolution Race, I will start by giving you a brief introduction. Revolution Race is an international outdoor brand offering a wide range of outdoor products, mainly clothing, but also shoes, bags, and also other products. Everything started 10 years ago with pants, and that category is still the biggest product category. We operate with a digital D2C business model, meaning that we skip the middleman and sell our products directly to our customers. And we do this primarily via our own website, Revolution Race, or through marketplaces such as Amazon. So Revolution Race was founded in 2013, but launched in 2014, and we have been listed on Nasdaq Stockholm since 2021. So a little bit more than three years now. Our headquarter is located in Borås in Sweden, and we have approximately 130 employees working at Revolution Race. And of course, since we are focused on our D2C model and digital D2C models, digital way of working is central. And we strive to have an engaged customer community and high customer satisfaction. And this has resulted in more than 660,000 unique product reviews and almost 2 million followers now and fans on our social media platforms. With our digital D2C business model, we can secure our competitive offering and at the same time also maintain industry-leading margins. But also the model makes it possible for us to act fast and, for example, react to changes in the industry, which is important when the market is challenging or uncertain. Revolution Race has become an international brand, and I think this picture very good illustrates our international presence. We now have customers in around 40 countries. and 18 localized web shops. We are currently fulfilling orders at two main logistics hubs with partners in Germany and Sweden and with a smaller location in the US. We have all our employees working out of Sweden and we design all our products in-house and work together with more than 25 suppliers for the production in China or in, sorry, in Asia, that is. Now, let's take a look at the performance and sales development for the first quarter. We are starting off the new financial year with continued growth. When we look at sales growth in local currencies, it reached 5%. In SEK, our net sales amounted to 350 million Swedish kronor. Despite a challenging market environment, this means that we continue to grow our market shares, although warmer weather and a challenging market sentiment impacted sales negatively. It is clear that when we headed into the quarter, we anticipated a higher growth rate, but the late or delayed autumn softened our growth throughout the quarter and It's like the period showed mixed performance with weaker sales in August, followed by stronger numbers in September. Thus, we closed the quarter at growth levels higher than for the quarter overall. The warmer weather also influenced our product mix, for example, reducing demand for shell products significantly compared to typical seasonal patterns. We are talking more than 30% decline in the shell category, which is in August, which is, of course, had a big impact on the total number. Now let's look at the different regions and sales in the rest of the world region grew by 11% in local currencies, while in the dark region growth was 8%. Sales in the Nordic region declined by 4% in local currencies, primarily due to the negative performance in Finland, which impacted the Nordics performance negatively. In fact, we did see positive growth in Sweden. So this was the first time in a year that we saw negative growth in this region. But all in all, we are reporting growth in a market that clearly remains challenging. And this is proven by several external and also internal data points that we have at hand. When we take a closer look at industry figures, we can proudly see that we are growing faster than many of the international brands and that we are outperforming the market in general. Based on reports from, for example, industry colleagues and also other reports that are official, such as the Swedish Sport Index, who report a sales decline of around 15% in Sweden. So we estimate that the market decline with more than 10% in many countries. Our 5% growth in light of that in the quarter, therefore, clearly indicates that we are increasing market shares at a high pace. And I think this demonstrates the strength of our offering and also our business model. Let's look closer at the other highlights during the first quarter. And to support growth, both in the short and long term, we have increased our marketing investments and expanded our product team to accelerate product development. The gross margin in this seasonally smallest quarter was 70%. And we have seen price reductions and campaigns in the market, and we are not unaffected. We managed to balance discounted sales. In fact, in September, we saw a stronger gross margin than that we report for the full quarter. The EBIT for the quarter amounted to 57 million Swedish krona, resulting in an adjusted EBIT margin of 20.5% for the past 12 months. And also in September, the EBIT margin was above 20%, which is in line with our target and also important to highlight. The stronger Swedish krona compared to the same quarter last year had a negative impact on the quarter's sales and gross margin. And also additionally, we observed a negative result effect of 3 million in other operating income and expenses, which is related to exchange rate impacts on the balance sheet. We will come back to that. We maintain a solid financial position with a net cash of 131 million at the end of Q1. And on top of that, we have an unused credit facility in place. To prepare for the seasonally strong second quarter that we are now in, we have carried out a planned inventory buildup, positioning us well for the months ahead. In Q3, last fiscal year, we launched a share repurchase program which continued into the first quarter with total repurchases during 2024 now amounting to 166 million Swedish kronor, of which 69 million was used during Q1. And reflecting our profitability and financial position, the board has proposed a dividend of 1.2 Swedish kronor per share. And with shareholder approval at the upcoming AGM, the company will have distributed at least 298 million Swedish kronor to shareholders during 2024, of which 132 million is through dividends and 166 million in total through the repurchase program. To become the world's most recommended outdoor brand, taking a long-term responsibility in product development and other key areas is central. Strong customer relationships and feedback are crucial to our strategy and also our product development. And we now have over 660,000 product reviews with a record high average rating of approximately 4.6 out of 5. And this makes us very proud. I always want to repeat this as I think that this is the company's absolute most important asset. And further developing our product assortment is a central part of our growth strategy. And as a result, we launched several new products during this quarter. the first quarter that have been well received by our customers and also received high ratings from looking at the productive views for example sales of our products scenic rhyme and trace they have been strong and looking ahead we will maintain a high pace in product development and now look forward to launching a range of new products across several categories And with that, I would like to hand over to the company's CFO, Jesper Alm, who will present and walk through the financial performance. Jesper, please go ahead.

Well, thank you, Paul. And good morning, everyone. I'll talk you through our financial performance during the first quarter. Cross-profit amounted to 245 million SEK for the quarter, which is in line with 247 million for the first quarter last year. This equals a gross margin of 70% compared to 72.2% a year ago. The gross margin was negatively impacted primarily by a greater price reduction compared to the same quarter last year, but also the stronger Swedish Krona compared to the same period last year had a negative impact on both this quarter sales and gross margin. Moving on to operational expenses, we see an increase. We see a slight increase in personnel expenses compared to the same quarter last year. The increase in number of full-time equivalents is now, the number of full-time equivalents is now 132, and attributable to, amongst other things, Strategy to invest more in product development. Personnel costs as share of net sales remained at 7%, corresponding to the cost last year. Other external expenses increased to 158 million compared to 154 a year ago, which as a share of net sales of 45% is in line with the level last year. The cost increase in absolute terms is explained by these costs primarily being variable in relation to sales. EBIT for the quarter amounted to 57 million compared to 67 million a year ago, corresponding to an EBIT margin of 16.3% compared to 19.5 a year ago. The difference of 3.2 percentage points is the consequence of the lower gross margin, 2.2 percentage points and other operating expenses of approximately 1 percentage point. The adjusted EBIT margin last 12 months amounts to 20.5%. The balance sheet remains stable with limited changes. Networking capital increased to 318 million compared to 249 million a year ago. Changes in networking capital is primarily driven by an increase in trade payables and higher inventory levels. Inventory has increased as planned to enable higher sales during the seasonally bigger second quarter. The inventory amount to 577 million of which 447 million was goods in warehouse at the end of the first quarter compared to 420 million a year ago. Cash flow from operating activities came in at minus 82 million during the quarter and primarily as a consequence of the seasonal inventory buildup. Our financial position is strong and we had a cash position of 142 million at quarter end and net cash of 131 million when adjusting for lease liabilities. And as previously, we have an undrawn credit facility of 600 million available. And that expires in 2028. New supplier agreements with improved payment terms have shifted payments forward slightly during the quarter compared to the corresponding quarter a year ago. So in conclusion, Revolution Race has a strong financial position. Our aim is to distribute 40 to 60% of profit for the year in accordance with the dividend policy. And as a result of the company's continued growth and strong cash flow, the board has proposed a dividend of 1.2 SEC per share, representing a dividend growth of 40%. In addition, and as Paul mentioned, we have repurchased shares up until now for a total amount of 166 million. We currently hold 3.3 million shares. Provided AGM approval of the dividend, the combined distribution to shareholders during 2024 will amount to approximately 300 million. So I think that sums up my part and I'll hand over back to you, Paul.

Thank you, Jesper. So to conclude, I want to say that Revolution Race is well positioned for the future with a large community, many satisfied customers, high profitability and also a solid financial position. Our customer offering built on high quality products at competitive prices is successful and we have established with that a strong market position. And by remaining true to our strategy of avoiding middlemen, we are confident that we can continue to drive growth. We estimate that we continue to outperform the market in general as we continue to gain market shares in a challenging market. And at the end of the first quarter, we had higher sales growth than for the full first quarter. And we are now looking forward to the most important period of the year. And note that sales growth in October compared to the corresponding period last year was slightly above the sales growth for the full first quarter of 2024 and 2025. So we are very excited and look forward to the upcoming weeks and months and historically our peak season. And that concludes our comments on the result. And before we finish, I would like to take the opportunity to thank the whole team at Revolution Race. And of course, our customers, followers, shareholders and partners. I look very much forward to continue to build on Revolution Race success together with all of you. And with that, we are now happy also to answer questions. So therefore, I ask the operator, do we have any questions?