RVRC Holding AB (publ)

Welcome to the Revolution Race Q4 presentation. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the CEO, Paul Fishbein, and CFO, Jesper Ahm. Please go ahead.

Thank you operator and good morning everyone and welcome to this conference call where we will address the report for the full year and fourth quarter of the fiscal year 2024-25. Our financial year starts 1st of July and ends 30th of June. So Q4 means that the period April 1st until June 30th. My name is Paul Fishbein and I am the CEO of Revolution Race and joining me today for today's conference call also I have the company's CFO Jesper Ahl. For those of you who are new to the Revolution Race story, I will now start by giving you a very short intro. Revolution Race is an international outdoor brand offering a wide range of outdoor products, mainly clothing, but also other products such as shoes and bags. Everything started with the 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. And we do this mainly via our own website, the Revolution Race website, but also through marketplaces such as Amazon. And with our D2C business model, we can secure our competitive offering and at the same time maintain industry-leading margins. Revolution Race was founded in 2013 and we launched in 2014 and we have now been listed on Nasdaq Stockholm since 2021. Our headquarter is located in Sweden and we have approximately 130 employees. This picture illustrates our international presence. We have customers in around 40 countries and 18 local webshops. We are fulfilling orders at our two main logistics hubs with partners in Germany and Sweden. And we also have a smaller location in the US. We design all our products in-house and work together with more than 25 suppliers for production in Asia. So that was a short intro. Now let's take a look at our performance and also net sales development. And we conclude the full financial year of 2024 and 2025 with continued growth. During the year, we have strengthened our positions and significantly increased or market shares in many key markets. Net sales for the full year totaled 1.9 billion Swedish krona, which is a growth of 6% in local currencies for the full year. The last 12 months has been characterized by a challenging market environment, and I think it's important to highlight also the recent strengthening of the Swedish krona. And that had a negative currency effect on our reported revenue. We report in SEK, Swedish krona, but the majority of our revenue is generated in other currencies. And this currency effect was most significant in this fourth quarter when the Swedish krona was strengthened. In the fourth quarter of the financial year, the net sales increased by 4% in local currencies and amounted to 405 million Swedish krona. Looking at the different regions in the quarter, the Nordic region continued to perform well as sales grew by 15% in local currencies. And I think that clearly demonstrates that we continue to increase market shares. For example, when we compare with the Swedish report called Spot Index, it is clear that we grow faster than the market again. We are also continuing to strengthen our market positions in the important DACH region. Switzerland reported the highest growth in that region during the fourth quarter, followed by Austria. Both markets grew by more than 20% in the quarter. But in Germany, our largest and most important markets, looking at the size of that market, conditions continued to be challenging, but we are nevertheless continuing to increase market share and we hope that the market will start to grow again soon. For the financial year as a whole, we delivered growth across all regions. The DACH region grew by 7% in local currencies. The Nordic region also grew by 7% for the full year. And for the full year, we saw solid growth in several markets where we believe there is significant potential for continued expansion. This includes Austria grew by 22%, Switzerland 23%, and UK 11% in local currencies. Now let's also continue to look closer at the performance during the fourth quarter. And as mentioned, we saw significant currency effects on revenues and also then margins during the quarter. In Swedish krona, the operating profit for the quarter was 63 million. In Swedish krona, the EBIT was lower than last year, but In fact, when adjusting for currency effects, the operating result for the fourth quarter was roughly in line with the results for the corresponding quarter last year. And I think this is important to understand. And we can, of course, deep dive into the currency impacts during the Q&A if you wish. Looking at the full year, underlying earnings in local currencies improved compared to the previous financial year. For the full year, the reported adjusted operating profit was 383 million and that was in line with the previous year's result of 389 million. when we take into account the net effect of other operating income expenses, which was four million this year compared to plus two million in the previous year. So if you take that into account, the results are in line. On top of this, one can also add the currency related top line effect, especially in the fourth quarter, in order to make the full comparison with last year. And I really think it is important to understand this dynamic when understanding the business. We report in Swedish krona, but 90% of our revenues are generated outside of Sweden, especially from countries with Euro. And looking at the cost side, we have a higher degree of cost in SEC compared to the revenue. So of course, we are impacted when currencies fluctuate. Our full year adjusted EBIT margin amounted to 19.9%. So we continue to deliver strong margins and we are proud to be among the most profitable companies in the industry. And I think this demonstrates also our ability to combine growth with profitability despite challenging times. Our financial position remains strong. Inventory levels are well balanced and the inventory is expected to also gradually decrease over the upcoming 12 months. At the end of the fourth quarter, we had a net cash position of 177 million SEK. And on top of that, we also had an unused credit facility of 600 million SEK. Swedish krona and as we today report the full year we also report that the board also proposes the dividend in light of the company's position the growth the cash flow during the year the board of directors proposes a dividend of 1.35 Swedish krona per share. This is in line with our dividend policy and implies an increase of the dividend for each year since the company's IPO. On top of this, we also continued our share repurchase program as part of our efforts to optimize the company's capital structure and create long-term shareholder value. In total 337 million Swedish krona was distributed to shareholders during the financial year of which 132 million through dividend for 2023-24 and 205 million Swedish krona through share repurchases and during the fourth quarter 1.1 million shares were repurchased for a total of 51 million Swedish krona. And we aim to continue with this as our ambition is to reduce. We have a long term view on this and our ambition is to reduce the net cash position in a balanced way through dividends and also share repurchases without creating a net debt position when excluding seasonal fluctuations. And we do not foresee any big capex investments in the business in the near future. If we continue, our close relationship with our customers continues to be one of our most important assets and the driver of our success. Today, we have more than 2.2 million followers across our social media channels and more than 730,000 product reviews with an average rating of 4.6 out of five. And that level of engagement builds trust, adds value, strengthens loyalty and gives us a real competitive advantage. And this is a core part of our strategy and something we monitor very closely. But we have also been busy developing by the other parts of the company. For example, in April, We opened our first physical outlet store and soon we will open a brand store in central Stockholm. So stay tuned for that. While we are a digital first business, we also see clear value in meeting our customers physically in selected locations. And these stores complement our e-commerce offering and help us to strengthen the brand and also to reach new customers. And we can also say that we continue to evaluate more future store openings, including also potential locations outside Sweden. And we of course remain selective in our approach, but hopefully we will be able to tell you more about this soon. On the product side, we continue to broaden our outdoor range. Our GP and Orban pans are still our biggest sellers, and we continue to develop our assortment. Operationally, we are building for scale. We have signed an agreement to move our Nordic warehouse to a new automated logistics center outside Stockholm. And the large automation project with the robotical system was recently deployed at our German site. And both these initiatives will support higher volumes going forward. And with this presentation, I would like to hand over to the company's CFO, Jesper Alm, who will now present and walk through the financial performance. Jesper, please go ahead.

Well, thank you, Paul. And good morning, everyone. I will briefly talk you through our financial performance during the fourth quarter and the full financial year 24-25. Gross profits amounted to 281 million for the quarter, slightly lower than compared to the 293 million a year ago. And this equals a gross margin of 69.4% compared to 71.9% last year. The decrease in gross margin is mainly attributable to a non-favorable currency effect on net sales in relation to cost of goods for resale. Gross profit for the full year increased to 101.344 billion compared to 1,312,000,000 last year, sorry. And this equals a gross margin of 69.8% compared to 71.3% last year. We note that the personnel expenses are in line with the same quarter last year. The number of full-time equivalents was 132, which is flat compared to the 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 company's strategy to invest more in product development. Personnel costs as share of net sales were in line with last year. Other external expenses were 182 million compared to Q4 last year of 185 million. And this as share of net sales, approximately 45%, were in line with last year. EBIT and adjusted EBIT for the quarter and those amounts are the same. They amounted to 63 million compared to 74 million a year ago. This translates to an EBIT margin of 15.5% compared to 18.3% last year. The non-favorable currency effect affecting reported revenue and the gross margin had a corresponding impact on the operating profit. Adjusting for the adverse currency effects, profitability is roughly in line with the comparison period. Adjusted EBIT for the financial year amounted to 383 million compared to 389 million the year prior. And further adjusting for other operating income and expenses, the underlying EBIT was flat. The balance sheet remains stable with changes in line with seasonality. Networking capital increased to 261 million compared to 187 million a year ago. And the changes in networking capital is primarily driven by higher inventory levels and a decrease in cash. A dividend of 132 million SEK was paid out during the second quarter last year being November 2024. Our continued repurchase of shares amounted to 51 million SEK during the fourth quarter and for the full year that amount was 205 million. The inventory amounts to 521 million, of which 439 million was goods in warehouse compared to 448 million a year ago. Goods in transit has decreased slightly from 76 million last year to 72 million at the end of the year. And inventory is well balanced and expected to gradually decrease during the current financial year. Our financial position is strong and we had a cash position of 189 million at quarter and year end or a net cash position of 177 million when adjusting for lease liabilities. The credit facility of 600 million SEK remains available and undrawn. Cash flow from operating activities came in at 85 million SEK during Q4 and primarily attributable to changes in inventory and operating receivables. In conclusion, we have a strong financial position. We aim to distribute 40 to 60% of net profit annually in accordance with the dividend policy. And as a result of the company's continued growth and strong financial position, the board proposes a dividend of 1.35 sec per share. This represents a dividend growth of 12.5% compared to the 1.2 sec per share paid out last year in November. This proposed dividend amounts to approximately 144 million SEK in total, representing a payout ratio of around 50%. And I note that we over the four years since IPO and the first dividend in 2021 have more than doubled the dividend per share. And in addition to the dividends paid out or now proposed during the quarter, we continued repurchasing shares in line with the AGM mandate. And the total amount was, as previously discussed, 51 million. SEC and since the AGM in November 2024 we have repurchased 3.2 million shares out of the 109.6 outstanding and that for a total consideration of 137 million SEC and with that it's over and out from me, Paul.