RVRC Holding AB (publ)

operator and good morning everyone and welcome to this conference call where we will address the report for the second quarter of the financial year 2024 and 25. our financial year starts 1st of july and ends of on 30th of june so q2 means that the period october 1st to december 31st My name is Paul Fischbein and I'm the CEO of Revolution Race and with me for today's conference call I have the company's CFO Jesper Alm. For those of you who are not familiar with the Revolution Race, I will start this presentation by giving you a brief introduction. Revolution Race is an international outdoor brand offering a wide range of outdoor products, mainly clothing, but also other products such as shoes, bags and other products. Everything started with pants and that category is still the largest product category. We operate with a digital D2C business model, and that means that we skip the middleman and sell our products directly to our consumers. We do this mainly via our own website, Revolution Race, or through marketplaces such as Amazon. Revolution Race was founded in 2013 and launched in 2014 and we have been listed on Nasdaq Stockholm since 2021. Our headquarter is located in Sweden and we have today approximately 130 employees. And with our digital DTC model, we can secure our competitive offering and at the same time 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 these days when the market is uncertain. Revolution Race has now become an international brand, and this picture, I think, illustrates very well our international presence. We have customers today in around 40 countries, and we have 18 localized webshops. In fact, we actually opened a possibility for customers in Australia, South Africa and also New Zealand to buy our products and we are now pleased to report that our first orders from all these three new countries have been received. We are currently fulfilling orders at our two main logistics hubs with partners in Germany and in Sweden and we also have a smaller location in the US. We have all our employees working out of Sweden and we design all our products in-house and then work together with more than 25 important suppliers for the production in Asia. Okay, so now let's take a look at the performance and sales development for the second quarter of our fiscal year. And we are very pleased to present continued growth and strong results. And in fact, both sales and EBIT hit record levels and all time highs during the last quarter. Sales during the quarter were particularly strong in November and net sales for the entire quarter amounting to 684 million Swedish krona compared to 613 million a year ago. And the sales growth was then 12% in SEC and 11% in local currencies. So we continue to increase our market share and we are satisfied with this development, especially as the market continues to be challenging. In the second quarter, we delivered growth across all three regions. The DACH region performed well, growing by 15% and we saw sales in Austria and Switzerland continue to show solid growth. And now Austria now being our third largest individual market in the company overall for the quarter. Looking specifically at Germany, reports show that the overall consumption declined during October and November, while we continue to demonstrate solid growth over the same period, which I think is a sign of strength. The growth in the Nordic region amounted to 9% and sales growth in Sweden reached 15%. But the region was negatively impacted by continued weak sales in Finland. Sales in the rest of the world region continued to grow and the most important note here is that we continue to see good growth in the UK, which is the biggest market in that region. So all in all, a good quarter in many markets, despite that the market remains challenging. Based on the growth we are reporting and the data points we are also monitoring externally, we believe that we are outperforming the market overall and continue to increase our market shares. if we continue to look closer at the other highlights during the second quarter looking at the numbers it is our best quarter ever and we have successfully maintained strong and industry leading both gross margin and operating margins sales hit our all-time high and our ebit is also a new quarterly record record um The gross margin for the second quarter was 70.3% and the adjusted EBIT for the quarter amounted to 162 million Swedish krona, resulting in an adjusted EBIT margin of 23.6%, which is industry-leading. Our financial position continues to be strong with a net cash position of 270 million SEK at the end of Q2. And this is despite that we have been distributing a dividend of 132 million SEK during the quarter and also repurchase shares worth 59 million SEK under the repurchase mandate approved by the AGM and initiated by the board in November 2024. And also in accordance with the AGM decision we have cancelled 3.3 million previously repurchased shares representing 2.9% of the total shares. Lastly, also in the balance sheet, we have an inventory position to facilitate our sales volumes. Due to logistical disturbances in the world, we have produced some products earlier compared to previous years in order to secure that we always have relevant products in stock. This, I think, gives us a competitive advantage and also impacts the inventory level somewhat. But all in all, we are satisfied with the inventory position. Our customer relationships and their active engagement in providing product reviews are crucial to our success. I say this often and used to repeat it, but I cannot emphasize enough the importance of our community. We have an asset-light balance sheet, but our most important asset is our satisfied customers. And that we have now more than 2 million followers on our social media channels and the number of unique product reviews now exceeds 700,000 with an average rating of 4.6 out of 5. We continue to expand and refine our range of outdoor products. Sales of our Alpine collection launched last winter and something that we expanded for the current season performed very well and we see growth over three times compared to the second quarter last year. And now we are selling Alpine during this season for approximately 100 million SEK. Our winter jackets, such as the new models Scenic and Rime, introduced in September, received excellent ratings from our customers, and we are nearly sold out of these products during the quarter. And as we look ahead to the spring, we are excited about the launch of new products, including a highly exciting introduction of a new footwear program. And with that, I would like to hand over to the company CFO Jesper Alm, who will now present and walk through the financial performance during the quarter. So with that, Jesper, please go ahead.

Well, thank you, Paul. And good morning, everyone. I'll talk you through our financial performance during the second quarter. Gross profit amounted to 481 million SEK, which represents a growth of 12% compared to the 400. million a year ago. And it equals a slightly improved gross margin amounting to 70.3% versus 70.2% a year ago. Moving on to operational expenses, we see an increase in personnel expenses in absolute terms compared to the same quarter last year. The increase in number of full-time equivalents is up to 134, and that's primarily attributable to the product and production side of the organization, which is in line with the strategy to invest more in product development. Personnel costs as a share of net sales was 4.7%, which is in line with Q2 last year. Other external expenses increased to 290 million compared to 252 a year ago, and which has a share of net sales of 42% is in line with the level last year. The cost increase in absolute terms is explained by these costs to a large extent being variable in relation to sales. EBIT for the quarter amounted to a record high 158 million compared to 143 million a year ago. And adjusted EBIT amounted to 162 million compared to the 146 that we showed a year ago. This translates to an EBIT margin of 22.9% and an adjusted EBIT of 23.6% compared to the 23.8% last year. And the adjusted EBIT margin over the last 12 months amounts to 20.6%. The balance sheet remains stable with changes in line with seasonality. Networking capital increased to 118 million compared to 84 million a year ago. And changes in networking capital is primarily driven by an increase in trade payables and higher inventory levels. To address uncertainties around the global logistics disruptions, we have brought forward purchases of important products to compensate for increased time at sea. This ensures high availability of key products and has resulted in a higher inventory level in support of future sales volumes. The inventory amounts to 592 million, of which 403 was goods in a warehouse which compares to 322 a year ago and goods in transit being at sea has increased from 94 million last year to 160 161 million this quarter cash flow from operating activities came in at 327 million in q2 Our financial position is strong and we had a cash position of 280 million at quarter end or a net cash position of 270 when adjusting for lease liabilities. We still have an undrawn credit facility of 600 million SEK available which expires in 2028. So in conclusion, revolutionaries has a strong financial position. Revolution Race aims to distribute 40 to 60% of profit for the year in accordance with the dividend policy. And based on the resolution passed at the AGM in November 24, a dividend of 1.20 sec per share was distributed to shareholders during November, corresponding to a total of 132 million sec. This represents a dividend growth of 40% and a payout ratio of 43%. In addition, we repurchased shares during the previous financial year and during the first and second quarter of 2024-25 financial year for a total amount of 225 million. We currently hold around 1.6 million shares of 109.6 million shares outstanding. In accordance with the AGM decision, we have also canceled 3.3 million previously repurchased shares and that represented 2.9% of total shares. So I think that sums up my part and I'll hand back over to you, Paul.

Thank you, Jesper. So to sum up, we are of course happy to report Record numbers. Market conditions remain challenging, but we start to observe signs of an improved consumer climate in some markets, such as Sweden. And as a result, we have also seen stronger performance in Sweden. And as that market stabilizes, we are well positioned with a strong financial position, satisfied customers, and a competitive offering that continues to deliver high quality products at competitive prices. So we see strong potential to continue our growth journey. And we also note that sales during the first weeks of January shows some growth compared to the same weeks last year. And that concludes our comments on the result. And before we finish, I would like to take the opportunity to really thank the whole team at Revolution Race, but also our customers, shareholders and partners. And I look forward to continue to grow