RVRC Holding AB (publ)

Welcome to the Revolution Race Q420 and 2526 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 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 fourth quarter and also the full financial year 2025 and 2026. Our financial year starts 1st of July and ends 30th of June so Q4 covers the period from April 1st to June 30th. My name is Paul Fishbein and I am the CEO of Revolution Race. And joining me today for this conference call, I have the company CFO Jesper Alm. Before we begin and talk about the fourth quarter, I would like to, of course, mention also the important event that took place shortly after the end of the financial year. In early July, we announced the acquisition of I Can I Will. And I'm very pleased that we, through the acquisition of I Can I Will, are taking an important next step with this first acquisition. It is an important next step of the development of RVRC Holding as a group and actually marks the beginning of an exciting new chapter for us as a group. And I will return to the acquisition and the rationale behind it later in this presentation. But first, for those of you who are new to the Revolution Race story, Let me start with an overview of the Revolution Race brand and our business model. Revolution Race is an international outdoor brand offering outdoor products, mainly clothing, but also shoes, bags, and other outdoor 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 and with our D2C business model. We can secure a competitive offering and at the same time maintain industry leading margins. As a digital player, our brand is very much built together with our community on social media. And today we have 2.5 million followers and almost 850,000 reviews on our site. Revolution Race was founded in 2013 and launched in 2014. And we have been listed on Nasdaq Stockholm since 2021. Moving on to this picture, I think illustrates our international presence. We have customers in around 40 countries and 19 localized webshops. However, we focus our efforts in 10 countries in Europe and also operate three physical stores in Sweden. We design all our products in-house and work together with more than 25 suppliers for the production in Asia. Now let's take a look at the performance and our net sales development. We conclude the full financial year of 2025-26 with continued growth and very solid profitability. Net sales for the full year amounted to a little bit more than 2 billion Swedish krona, resulting in sales growth of 8% in local currencies compared to last year. When we look at market data, we see that the market is weak. So despite uncertain market conditions, We increased sales and continue to gain market share in several key markets. Net sales in the fourth quarter amounted to 414 million Swedish krona corresponding to growth of 3% in local currencies compared to the same quarter last year. and we clearly aim for higher growth number but given the uncertain market environment we continue to grow and strengthen our position in several important markets and in fact it is clear that in some important markets our sales is actually performing very well. So let's have a look at our net sales development by region, because looking at the financial year as a whole, sales increased in all regions. DAX grew by 10% in local currencies, the Nordics grew by 9%, and the rest of the world region grew by 1%. But if we exclude North America, sales in the rest of the world region would have increased 6% in local currencies. While then total sales across all markets would have increased by 9%. Sales in the United States, they were high in the previous financial year and fairly high and have since then been negatively affected by the changing market conditions. In the fourth quarter, sales in the Nordics increased by 7% in local currencies and also in Swedish krona. What is interesting is that Sweden, we saw the highest growth there in Sweden with 12%. And I think this is a good example of strong performance in a mature market. particularly as we have seen reports such as Sport Index reported a 4% decline in sales of outdoor clothing during the same period. So this clearly indicates that we continue to gain market share. In DACH sales increased by 3% in local currencies and it was Austria and Switzerland that continued to perform well with double-digit growth in both markets. But we must also mention Germany where we note a weak consumer sentiment. And despite the challenging market, we continue to grow and market share and believe that we are strengthening our position in our largest market, even if we aim for more. And in the rest of the world region, sales decreased by 3% in local currencies in the quarter, but excluding North America, sales in the region instead would have increased by 2% and total sales for the company, 4%. if we look closer on For quarter, we continue to demonstrate our ability also to combine the growth with high profitability. EBIT amounted to 66 million Swedish krona, corresponds to an EBIT margin of 15.9%, and the gross margin improved to 72.2. During the quarter, we worked on some IT projects, for example, a new product information management system. And during the quarter, we also opened a store in Haparanda in North Sweden on the borders of Finland. And we can say that that is developing very well. We end the quarter and remain a strong financial position with inventory of 520 million SEK and the net cash position of 313 million. And also on top of that, an available credit facility of 600 million SEK at the end of this quarter. And if we summarize the full financial year, adjusted EBIT amounted to 425 million Swedish krona. That corresponds to an adjusted EBIT margin of 21%. And that confirms our continued industry-leading profitability. And of course, this is very strong and something we are also very proud of. During the year, we strengthened our operating platform. We completed the relocation of our Nordic Warehouse operations to a modern automated logistics center. And we also continued to develop our physical retail presence selectively, opening a brand store in Stockholm and also the store in the fourth quarter in Haparanda. And as I mentioned, the Haparanda store has performed very well. very well and as I also mentioned we worked on some IT projects during the year especially in the fourth quarter so our result is strong and our financial position remains strong therefore we can conclude the financial year 2025 and 2026 and the board of directors proposes a dividend of 1.5 Swedish krona per share and this proposal is in line with our dividend policy and we are happy to be able to continue to grow the dividend again. So even if this report should focus on the Q4 numbers, I want to talk a little bit about the acquisition of I Can, I Will that we actually announced in July. And I am very pleased that we, through the acquisition of I Can, I Will, are taking an important next step in the development of RVRC Holding as a group. We have always had a disciplined approach to capital allocation and we will continue to have that. We will continue to have strong focus on organically developed revolutionaries but have for some time considered adding M&A as a capital efficient complement to our growth strategy. And if we look at the transaction, RVRC Holding is acquiring 90.1% of ICANA Will. The initial purchase price corresponds to a valuation of 700 million Swedish krona in enterprise value for 100% of the company. There is potential additional consideration of up to 175 million Swedish krona. payable in two tranches and they are based on performance during 2026 and 2027. This initial purchase implies an EV-EBIT multiple of 9.5 based on the LTM data as per June 26 and if we assume full payment of the additional considerations the total purchase price will correspond to an EV-EBIT multiple of 7.8 times. And the acquisition is financed through a combination of existing cash, available credit facilities, and the transfer of our treasury shares. Now let's take a closer look at the I Can I Will company. And I Can I Will is a Swedish sportswear brand founded in 2012, headquartered in Stockholm in Sweden. The products are primarily sold through a digital DTC first model like Revolution Race and has, like Revolution Race, also built its brand together with its community, having now 620,000 social media followers and more than 230,000 product reviews with a rating of 4.5 out of 5. On the numbers, LTM sales per end of June was at 470 million Swedish krona. Growth is strong. Q4 sales are expected to reach 124 million representing a growth of approximately 30%, which was also roughly the growth in Q3. Margins have also improved with this growth. Adjusted EBIT reached 73 million for the full year, 25-26. That's up from 52 million the year before. And that's an EBIT margin for the full year of approximately 15.6%. And that's a step up from past numbers. And in Q4, the EBIT margin was at 16.3%, which is also higher than the same period last year. Looking at the geographic mix, the Nordics account for over 80% of the sales, with Germany and the rest of Europe representing the remaining. However, those markets are growing faster. What is interesting to note is the potential in Germany and Dach as Germany grew over 50% in the calendar Q1 26. By channel iCanIWill is at around 87% DTC and 13% wholesale and by gender 82% of sales are to female customers and 14% to male customers. As part of our M&A strategy, we have developed an M&A framework and we can clearly see that Icana Meal meets all our M&A criteria. Icana Meal is clearly a digital first D2C company with a strong community. Growth-wise, it meets our target and we see that the company grew around 30% in the last two quarters respectively. Profitability is good and size-wise, Aikana Wheel is right in the middle of our size range. The product category within YUM and training apparel with functional materials is a natural adjacency for our assortment and Valuation wise at acquisition the EBIT multiple as I mentioned is 9.5 times but falls to 7.8 times assuming the full additional purchase price is paid. Operationally it shares very similar characteristics to Revolution Race. It's e-commerce, it's asset light, and it's cash generative. And this is something that we truly understand. And lastly, we know many of the people at Aikana Wheel and understand that the cultural fit is there. Our integration philosophy is a decentralized philosophy with a focus on best practice sharing rather than full operational integration. This picture illustrates that the companies and brands will operate separately but have the same owner in an RVRC holding. We believe this approach preserves entrepreneurial drive and the brand's identities and offering and local market knowledge, both within Revolution Race and I Can, I Will. And it also causes less disruption to management, employees, customers and partners. The structure is also an attractive proposition for the ICANA Will management who seek continuity and we of course see a strong signal of commitment that management want to stay and continue to build ICANA Will but also become an important shareholder to RVRC and thus believe in our joint future. So with that I would like to hand over to our CFO Jesper Alm who will take us through the financial year for the fourth quarter and for the full year. So Jesper please go ahead.

Thank you Paul and good morning everyone. I will briefly cover the financial performance during the fourth quarter and the full financial year 2025-2026. Gross profit amounted to 299 million SEK for the quarter compared to 281 a year ago. And this equals a gross margin of 72.2% compared to 69.4 last year. The increase in gross margin is mainly attributable to currency effects on goods for resale. So in essence, this is the weaker USD for purchasing, only partly offset by a weaker euro. And both currencies versus the reporting currency being SEC. Gross profits for the full year increased to 1.4 billion SEK compared to 1.3 billion last year. And this equals a gross margin of 70.5 compared to 69.8% last year. Personal expenses are higher compared to the same quarter last year and the number of full-time equivalents was 147 compared to 132 last year. The increase includes staff in our retail operations and now that is three stores in total. Other external expenses were 191 million compared to 183 a year ago. As a share of net sales of 42%, the number was higher than last year, and this is partly due to investments in IT and marketing. EBIT for the quarter amounted to 66 million SEK compared to 63 million a year ago and this translates to an EBIT margin of 15.9% compared to the 15.4 a year ago. Adjusted EBIT for the financial year amounted to 425 million compared to the 383 a year ago and the current The adjusted EBIT margin then is 21% compared to just below 20% last year. Our financial position is strong. We had a solid net cash position of 328 million at quarter end or a net cash position of 313 million when adjusting for lease liabilities of 15 million SEK. The credit facility of 600 million SEK remains available and undrawn as of June 30th. Cash flow from operating activities came in at 31 million in Q4 compared to 85 million for the same period last year. The lower cash flow compared to the corresponding quarter last year is mainly attributable to ongoing inventory build-up and changes in operating receivables. The credit facility of SEK 600 million was undrawn at the end of the quarter, but following year-end, the revolving credit facility was increased by SEK 300 million to a new total of SEK 900 million. And further, following the acquisition of ICANN iWILL at the beginning of July, we entered into a net debt position. The inventory amounts to 520 million of which 336 million was goods in warehouse being sellable compared to 439 million a year ago. So inventory has increased by 111 million compared to Q3 and that is driven by an increase in goods in transit. Networking capital decreased to 172 million compared to 262 million a year ago. Changes in networking capital is mainly attributable to increase in accounts payable. We aim to distribute 40 to 60 percent of net profits 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 1.5 SEC per share. This represents a dividend growth of 11% compared to the SEC 135 per share paid out last year. The proposed dividend amounts to approximately 161 million in total representing a payout ratio of around 48%. and I note that we over the five years since the IPO and the first dividend in 21 have more than doubled the dividend per share. 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 repurchased was 68 million SEK during the quarter. And at the end of the financial year, we held 2.8 million treasury shares, of which 2.6 approximately were used as consideration shares in the acquisition of ICANN iWILL. So treasury shares remaining after the acquisition is approximately 200,000. And with that, it's over and out for me, Paul.