RVRC Holding AB (publ)

thank you operator and good morning everyone welcome to this conference call where we will address the report for the third quarter of the financial year 2024 and 25. our financial year starts 1st of july and ends the 30th of july Paul Fischbein and I am the CEO of Revolution Race and with me today for today's conference call I have the company's CFO Jesper Ahl. 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 other products. Everything started with pants and that category is still the largest product category. We operate with a D2C business model, meaning that we skip the middlemen and sell our products directly to our customers. 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've been listed on Nasdaq Stockholm since 2021. Our headquarter is located in Borås in Sweden, and we have approximately 130 employees. With our D2C business 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 also react to changes in the industry which is important when the market is uncertain. Revolution Race has become an international brand and this picture I think illustrates our international presence very well. We have customers in around 40 countries and we have 18 localized webshops. We are fulfilling orders at the two main logistics hubs with partners in Germany and Sweden and with a smaller location also 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 Asia. Okay, so now let's take a look at the performance and sales development for the third quarter. And we report continued growth and also continued high profitability. The net sales for the entire quarter amounted to 486 million Swedish krona compared to 478 million Swedish krona a year ago. And the sales growth was 2% in both Swedish krona and also in local currencies. We of course aimed for a higher growth number, but we continue to outperform the market and increase market shares, which is important, especially as the market continues to be challenging in many countries. For the full quarter, the Nordic region continued to perform well as sales in the Nordics grew by 10% in local currencies. It is encouraging for us to see the positive trend continuing in the Nordics despite challenges in the Nordic outdoor market. For example, according to a report called Sport Index, the outdoor market in Sweden declined by 2.5% during the quarter. In the DACH region, we grew by 1% in local currencies, while sales in the rest of the world decreased by 3% in local currencies. In the DACH and rest of the world regions, market conditions also remain weak, according to reports that we have access to, yet we continue to gain market share in several countries. Among our larger markets, Switzerland recorded highest growth during the quarter. UK was again now the third largest market after Germany and Sweden. And in Germany, our largest and most important market, we see no real clear signs of a near-term improvement in market conditions. But despite this, it is clear that we continue to strengthen our position. So all in all, even if sales growth is below our long-term financial target, we believe that it is an okay performance across many markets. We are confident that we are outperforming the market as a whole and continue to increase our market shares. In many markets, we are close to the 20% increase in market share, which we have as our growth target. Let's look closer at other highlights also during the third quarter, which are important. The adjusted operating profit for the quarter amounted to 201 million Swedish krona, corresponding to an adjusted EBIT margin of 20.8%. And again, our financial target is to maintain at least 20%. So this is in line with our target. Delivering a strong result is important to us and the underlying result improved compared with last year since we had some currency effects from the balance sheet, from balance sheet items not related to operations resulted in other operating expenses of 4 million SEK for the quarter. Whereas if you look at the comparison quarter actually showed other operating income or income of 6 million SEK. So if you adjust for this, which is a difference of 10 million, the underlying EBIT grew more than sales. And I think that this is in fact important to understand. And we are actually proud to continue to report industry leading margins despite these challenging times. So we maintain a solid financial position with a net cash balance of 147 million SEK and also on top of that an unused credit facility of 600 million Swedish krona as of the end of the quarter. Our inventory remains well balanced and we expect it to gradually decrease over the coming 12 months. And also during the quarter we continue to repurchasing shares in line with the mandate from the AGM and acquire shares for a total amount of 27 million SEK in the quarter. Let's continue now looking at April we opened our first outlet store in the outlet village of Bakaby outside of Stockholm and that store opening was successful and even though it's only one store and one store doesn't have a big impact we see exciting potential to expand our retail footprint. So the message is that we are currently now evaluating opportunities for further physical locations as a complement to our e-commerce business. Also, our close relationship with our customers continues as it used to do in previous quarters to be a key driver of our success. I often mention this, but I think it is worth repeating as it is maybe our most important asset with over 720,000 product reviews. and an average rating of 4.6 out of maximum 5, along with more than 2 million followers across our social media channels, our community plays a vital role in building our company and strengthening our brand. And we focus on this a lot and monitor it closely. 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 of the quarter. So please, Jesper, go ahead.

Well, thank you, Paul and good morning, everyone. I will talk you through our financial performance during the third quarter. Gross profit amounted to 337 million SEC for the quarter, roughly in line compared to the 342 million a year ago. And this equals a gross margin of 69.4% compared to 71.5% last year. The decrease in gross margin is mainly attributable to a larger share of sales with price reduction, product mix, and a non-favorable currency effect on net sales in relation to goods for resale, where the SEC has strengthened versus the euro. And of course, also against the USD, but that is with a delayed effect in our purchasing of products. Moving on to operational expenses, we see a slight increase in personnel expenses compared to the same quarter last year. The number of full-time equivalents was 132, which is slightly more than the 121 a year ago, but lower than the 134 last quarter. The increase versus last year is primarily attributable to the product and production side of the organization, which is in line with the strategy to invest more in product development. Adjusted personnel costs as a share of net sales was 6.3% and the adjustment amounts to 21 million SEK and primarily relates to the stay on bonus that was accounted for in the quarter, which is cash flow neutral as it is at the same time has been booked as a shareholder contribution. So this is funded by the founders that from the time of the IPO. Other external expenses decreased to 200 million sec compared to Q3 last year of 216 million. And this as a share of net sales was 41% and is a decrease compared to last year to a large extent driven by efficient market spend. Adjusted EBIT amounted to 101 million SEK in line with the same number a year ago. And EBIT for the quarter amounted to 80 million SEK compared to 101 a year ago, translating into an adjusted EBIT of 20.8% and an EBIT margin of 16.4%. The adjusted EBIT margin last 12 months amounts to 20.5% compared to our financial target of 20%. The balance sheet remains stable with changes in line with seasonality. Networking capital increased to 294 million sec compared to 216 a year ago. And changes in networking capital is primarily driven by higher inventory levels. Inventory development then. The inventory amounts to 543 million SEK of which 484 was goods in warehouse being sellable and compared to 461 million a year ago. Goods in transit has decreased from 64 to 38 million and compared to last year and inventory has decreased by 49 million compared to the previous quarter and that was driven by a decrease in goods in transit. Our financial position is strong and we had a cash position of 159 million at quarter end or a net cash position of 147 million when adjusting for lease liabilities. The credit facility of 600 million SEK remains available and undrawn as of March 31st. Cash flow from operating activities came in at minus 110 million in Q3, primarily attributable to changes in operating liabilities. So in conclusion, Revolutionary has a continued strong financial position. During the quarter, we continued repurchasing shares in line with the AGM mandate, acquiring shares for a total amount of 27 million SEC. And under the current 200 million SEC mandate, we have now repurchased 86 million SEC. Altogether, during last financial year and during the current financial year, we have repurchased shares for a total amount of 251 million SEC. And we currently hold 2 million shares in treasury out of the 109.6 million shares outstanding. And with that, it's over and out from me, Paul.

Thank you Jesper. So to sum up, we are pleased to report continued growth and above all also strong profitability in a market that remains challenging. Our margins remain at industry leading levels and our solid financial position gives us the flexibility to continue to invest in future growth. and our strategically important product range expansion continues we see positive signs in many categories such as alpine as we have mentioned in previous calls but also shoes and lifestyle and we have now also opened our first physical outlet store and as i said one store doesn't have a big impact but the store opening was successful And we see exciting potential to expand our retail footprint. So as I mentioned, we are currently evaluating opportunities for further physical locations as a complement to our e-commerce business. But we will come back to you and to that when we have more things to say on that topic. Looking at market conditions it remains challenging but as the market stabilizes we are well positioned with strong financials, satisfied customers and a competitive offering with delivering high quality outer products at competitive prices. We see strong potential to continue our long-term growth journey and note also that sales during the first weeks of our fourth quarter show growth in local currencies compared to the same weeks last year. And that concludes our comments on the result. But before we finish, I would like to take the opportunity to thank the whole team at Revolution Race, our customers, shareholders, partners, and other stakeholders. I look forward to continue to grow and create value for the future with all of you. And with that, we are now happy to also answer questions. So operator, do we have any questions?