RVRC Holding AB (publ)

Welcome to the Revolution Race Q1 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 first quarter of the fiscal year 2025-2026. Our financial year starts 1st of July and ends the 30th of June. So Q1 means the period July 1st to September 30th. My name is Paul Fischbein and I am the CEO of Revolution Race. And joining me today for today's conference call, I have the company's CFO Jesper Alb. Before we jump into any numbers, for those of you who are new to the Revolution Race story, I will start by giving you a brief intro to the company. Revolution Race is an international outdoor brand offering a wide range of outdoor products, mainly clothing, but also shoes, bags and other outdoor related products. Everything started with pants and that product category is still the largest product category. We operate with a D2C business model, meaning that we skip the middleman and sell our products directly to our customers. We do this mainly via our own website, but also through marketplaces such as Amazon. With our D2C business model we can secure our competitive offering and at the same time maintain industry leading margins. We are a digital first company but we have recently also taken our first steps into physical retail. In April we opened our first outlet store outside Stockholm in Sweden and at the end of September we also opened our brand store in central Stockholm. Historically our brand was very much built with our community on social media platforms and today we have more than 2 million followers and over 740,000 reviews on our site. 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 approximately 130 employees. We move on and this picture I think illustrates our international presence very well. We have customers in around 40 countries. We have 18 localized web shops and now also two physical stores as I mentioned. We are fulfilling orders at two main logistics hubs with partners in Germany and Sweden and with a smaller location also in the US. We design all our products in-house and work together with more than 25 suppliers for production in Asia. Now let's take a look at our performance and net sales development. We started the financial year with a strong quarter. Net sales amounted to 392 million Swedish krona. That corresponds to a sales growth of 15.15% in local currencies compared to the same quarter last year. We believe that we are gaining market share in several markets as the overall market environment is described to remain challenging. The recent strengthening of the Swedish krona had a negative currency effect on our reported revenue since we report in Swedish krona, but the majority of our revenue is generated in other currencies. We deliver growth across all regions during the quarter. In the Nordic, sales growth increased by 19% in local currencies. In the Dakh region, growth was 18%, and in the rest of the world region, 2%. Switzerland was the market with the strongest growth during the quarter, followed by Austria. And together with growth of 14% in our largest market, Germany, this resulted in a solid overall performance in the important DACH region. In our most mature market, Sweden, we recorded growth of 18%. In the rest of the world region, we are strengthening our position in several markets, including Poland and the UK. In the US, we saw a sales decline due to higher tariffs, which impacted or contributed to lower growth for the rest of the world region as a whole. Now let's continue to look closer at the performance during the quarter. And we are also happy to report that we continue to deliver strong margins and remain one of the most profitable companies in our industry. Our numbers demonstrate our ability to combine growth with profitability despite an unfavorable currency impact from a stronger Swedish krona. And this impacts both top line, as I mentioned, but also gross margin and EBIT. During the first quarter EBIT amounted to 75 million Swedish krona corresponding to an EBIT margin of 19% and the gross margin for the quarter was 69.6%. We maintain a solid financial position with a net cash position of 163 million at the end of the first quarter and on top of that also an undrawn credit facility. Ahead of the second quarter we have carried out a planned inventory build-up and we are now well prepared for the seasonally strongest period of the year. Inventory is more or less in line with last year and we expect that the inventory levels will gradually decrease over the course of the financial year. On operational level we have strengthened our management team with the new chief product officer and the new chief technology officer and these additions strengthen both our product development and technological capabilities which will support the next phase of our journey. During the quarter, we continued our share repurchase program in line with the mandate from the annual general meeting, repurchasing shares for a total amount of 32 million. Since the AGM in 2024, we have now repurchased shares amounting to 168 million in total. And the board's proposal to the upcoming AGM in November is to cancel all repurchased shares. During the quarter, we have carried out several successful product launches. Our Shell products sold well compared to last year. One could note that it was challenging selling Shell products during the first quarter last year due to the late start of the fall. So good to bear in mind. Looking ahead, I also want to mention that we are excited to follow the launch of the new Ultra series. our most technically advanced collection to date, which was introduced now in early October a few weeks ago. The collection is using carefully selected materials designed to perform in tough conditions. And with that news, I would like to hand over to the company's chief financial officer, Jesper Alm, who will present and walk through the financial performance. With that, Jesper, please go ahead.

Thank you, Paul, and good morning, everyone. I will briefly cover the financial performance during the first quarter of the new financial year. Gross profit amounted to $273 million for the quarter compared to $245 million a year ago. And this equals a gross margin of 69.6% compared to the 70% flat last year. The slight decrease in gross margin is mainly attributable to currency effects on net sales and goods for resale. We note that the personnel expenses in absolute terms are slightly higher compared to the same quarter last year, while the number of full-time equivalents remained at just above 130. Personnel expenses as share of net sales were basically in line with those of last year, the first quarter. Other external expenses were 169 million SEK compared to 158 a year ago, and this as a share of net sales was approximately 43%, and that is lower than last year. EBIT, as Paul mentioned, EBIT and adjusted EBIT for the quarter amounted to 75 million compared to 57 million a year ago. And this translates to an EBIT margin of 19% compared to 16.3% last year. The non-favorable currency effect affecting reported revenue and the gross margin had a corresponding impact on the operating profit. And the primary contributor to the strong margin was good efficiency in marketing. Last 12 months, adjusted EBIT now is in excess of 400 million SEK. The balance sheet remains stable with changes in line with seasonality. Networking capital decreased slightly to 296 million compared to 318 a year ago. And changes in networking capital is primarily driven by slightly higher inventory levels and an increase in current liabilities. The inventory amounts to 586 million, of which 500 million was sellable or goods in warehouse, compared to a total of 447 million a year ago. And goods in transit has decreased from 118 million last year to 66 at the end of the first quarter. And ahead of the second quarter, we completed the planned inventory buildup to prepare for the peak season that we're now entering into. And reminding that inventory levels are expected to decline gradually over the financial year. Our financial position is strong, and we had a cash position of 181 million at quarter end. or net cash of 163 million SEK when adjusting for lease liabilities. The credit facility of 600 million SEK remains available and undrawn. Cash flow from operating activities came in at 27 million SEK in Q1. So in conclusion, we have a strong financial position and are well prepared for the upcoming dividend payment. Our aim is to distribute 40 to 60% of net profit annually, which is in accordance with the dividend policy. And as a result of our continued growth and strong financial position, 1.35 SEC per share, which represents a dividend growth of 13% compared to the 1.20 SEC paid out per share last year. And the proposed dividend in total amounts to 144 million, representing a payout ratio of 50%. In addition to dividends being paid or proposed in this case, as the AGM is coming up soon, during the quarter, we continued repurchasing shares in line with the AGM mandate of last year, acquiring shares for a total of 32 million SEK. And since the AGM in November 24, we have repurchased 3.8 million shares out of the 109.6 that we had outstanding a year ago. for a total consideration of 168 million SEK. And with that, it's over for me, Paul.