Thule Group AB (publ)

Good morning or good afternoon and welcome to the Tula Group Interim Report Q4 and End Year Report 2023. My name is Adam and I will be your operator for today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the floor to CEO and President Matthias Ankelberg to begin. So Matthias, please go ahead when you are ready.

Thank you so much. Welcome everybody to this Q4 call. I have with me also our new CFO, Toby Lawton. Some of you have met Toby already, and for the rest of you, I hope you will soon. But as it is, Q4, we will cover both the quarter and the full year today, and we will follow the presentation available on our website and on the conference call. Starting on page two and with the overview, the quarter is a delivers a solid result in what is still a tough market, as it was in Q3. Sales declined 5.6%, currency adjusted, and sales trends are really a continuation of what we saw in Q3. We will get back to that. As we also saw in Q3, we are, of course, pleased to see that new Tudor products continue to drive growth, also in a tougher market. EBIT improved a lot versus last year, 53 million versus four last year, and the cash flow is particularly strong in the quarter with 276 million. Turn to the full year, what stands out is really the cash flow. Sales was down minus 15%, currency adjusted. We had a quite weak start to the year with an improving sales trend for the second half, also partly driven by comparables. And an EBIT margin which was somewhat below last year, 16.5% versus 16.8%. And all-time high cash flow from operating activities at almost 1.9 billion Swedish. The ordinary dividend proposed to the AGM is SEC 9.5, 9.50 per share. And... Thule is in a financially strong position. We've always generated a lot of cash flow, and particularly so in 2023. And we are focused as a company on how to use the shareholders' funds in the best way. And having reviewed our plans and initiatives for 2024, together with the board also, we conclude that we can do all the investments and growth initiatives that we plan and still have financial capacity to pay a dividend of 9.5 sec per share. On page 3, turning to the reported net sales and EBIT figures, in the quarter, a decline of 1651 to 1566 in reported Swedish millions, and the corresponding EBIT increase of 253 million from four versus last year. For the full year, which I haven't talked so much about yet in numbers, we just see a sales of 10.1 billion Swedish last year versus 9.1 this year, corresponding to that 15% decrease in constant currency and a 10% in reported and an EBIT margin reduced to 16.5 compared to almost the same 16.8 last year. in EBIT versus 1.7 last year. On page five, talking about sales trends, which I mentioned initially, we really see in Q4 a continuation of the sales trends we saw already in Q3, except the general market environment, which is still characterized by cautious consumers and retailers. We see one big plus and one minus in terms of category performance. The plus for us, which again we saw already in Q3, is that bike-related products are back to growth, at least Thule bike-related products. And bike-related products is a big part of Thule these days, so that's of course very positive for us to see. On the minus side, the RV, recreational vehicle industry, is in a weaker position. in a weaker situation, and it is our only exposure to a cyclical segment, and we saw that that started to turn down in Q3, and that continues in Q4. The difference between the quarters is mainly the mix. So in Q4, it's our smallest quarter. We don't sell a lot of bike-related, as people don't bike as much in a wintery quarter. However, the RV sales is fairly flat, and that comes out as a small positive growth in Q3, but in a different mix and negative in Q4. We will turn to page five and talk about sustainability. Thule has ambitious financial goals, but we also have ambitious sustainability goals. And one of the most important goals that we focus a lot on is the CO2 reduction or greenhouse gas reduction targets that we have. And it's positive to see that the development is trending in the right direction also in 2023. We are working with this in many different ways and to highlight two important areas. I would like to mention our transition to green electricity and energy, where we are currently installing, for example, heat pumps in our biggest factories. And also the work, secondly, we do in terms of product design, to design products already from the start with a climate footprint in mind. And one really good example is Thule Epos, our newest and most premium bike carrier that not only is our most premium, but also one of the best in terms of CO2 footprint. And by designing consciously around other types of materials and solutions, we have, or our design team has done a great job of creating a product with about half the CO2 footprint of the equivalent or comparable products. So good to see the progress in CO2 reduction, and of course a lot more work remains. Another key area for Thule is our product development and our focus on driving growth through product development. And on page six, we could see the investments that we do in the product portfolio. We are currently in the most ambitious product development phase or period in the company's history. We have invested equivalent of 6.9% of sales in R&D product development during 2023. There are two positive news around this. One is in the sales numbers, we see that new Tudor products drive growth also in a tough market. And secondly, we have, thanks to these investments, more new products than ever before coming to market in 2024. So we will get back to that soon. Before we get back to that, I will now turn to Toby to cover the financials in San Francisco.

Thank you, Matthias, and very good to be here, and good morning, everybody. If we turn to the next slide where we have the reported income statement, and I'll start off here on the quarter, and when you look at the sales line, you can see we had a decline in the quarter versus last year of 5.2% or 5.6%. And this is driven, as Matthias has said, really by the decline in RV versus last year, while we see growth in other categories. If we go down to the gross margin, in quarter four, you can see the gross margin improved to 37.2%. This is an increase of nearly 6% versus prior year. And the drivers are the same as we had in previous quarter, with lower material cost We have lower freight costs, particularly inbound freight, and also a favorable product mix. Just looking at the full year here, our gross margin also improved on a full year basis and is now at 40.9% versus 38.1% last year. So it's back to levels pretty much in line with pre-pandemic levels on gross margin. EBIT margin in the quarter, 3.4%. Here it's very important to remember that quarter four is the seasonally low quarter, and that does also impact EBIT margins, as you can see. We had selling expenses in the quarter were increased versus last year, and this is driven by the increased investment in product development that Matthias just showed on the previous slide. That's the main reason. Admin expenses have reduced in the quarter. If we look on a full year basis then at EBIT margin, you can see EBIT at 16.5% versus 16.8% last year. So pretty much in line with our year on EBIT margin. And finally, going down to just for the tax line, the effective tax rate is very stable, exactly the same percentage as last year, 22.6%. And then net profit on the bottom for the full year, we generated just under 1.1 billion SEC of net profit. If I click to the next slide, a few words on cash flow. We had a very strong cash flow for the year. One of the main drivers was operating working capital, which you can see at the top here. And you can see the components of working capital on the right as well. Overall, we reduced working capital from 3.3 billion down to 2.4 billion, so a healthy reduction during the year. Accounts receivable and accounts payable were both pretty stable, although contributed positively to cash flow, whereas the big impact has come from a reduction in inventory. And we've managed to reduce inventory during 2023 with 800 million SEC, so a big impact. We had a target of 600 million for the full year, so we're ahead of the target that we set ourselves. And we're also now targeting a further reduction of 200 million SEC during 2024. So we expect to reduce inventory by 1 billion over the two years. And this is really feeding through in a strong cash flow, as you can see at the bottom, cash flow from operating activities. If I firstly take the quarter, quarter four, we had a cash flow from operating activities of 276 million. In the quarter, it was mainly driven by a reduction in accounts receivable. And that's partly the seasonal pattern of TULA. And then if we go to the full year, you can see a full year cash flow from operating activities of slightly under 2 billion SEC. So 1.85 billion SEC. So a very strong cash flow. And this is more than a billion, 1.2 billion better than prior year. And again, driven by... to some extent and a large extent by the reduction in inventories, but also the strong cash flow generation from the underlying business. So with that, I'll hand back to Mathias.

Thank you, Toby. We are now on page nine, and we will turn to reviewing the performance in our product categories. Page 9 provides the overview of our four product categories that we report. And as I mentioned in the beginning, we had a weak start to the year and a more positive sales trend to the second half. But on a full year basis, all product categories declined in both regions, despite the better second half. So we think it is more interesting to discuss the trends at the more category-specific level. And we will move to page 10. Sports and cargo carriers is our biggest product category and accounts for almost 60% of the sales in 2023. And we saw a return to growth during the second half of 2023. Again, the year was down 19% in sales, FX adjusted, with good growth during the second half, which was driven by bike carriers. Bike carriers have been driven by both bike retail coming back to healthy inventory levels, particularly in Europe and in many cases in the US. And also really supported by strong new Thule products. And Thule Epos, our new most premium bike rack, has driven good growth throughout the year since it was launched during spring 2023. Among the other subcategories, as we call them, cargo, which is roof boxes and roof racks, generally declined versus a very strong 2022, but is still at a very good level compared to pre-pandemic levels. So the decline is more a case of really tough comparables for 2022. Roof racks declined for the full year, but turned to good growth during the second half of the year. And roof top tents continued to grow throughout the year, also supported by the launch of the new TULA approach, which was launched in 2023. As we look forward in our biggest category, sport and cargo carriers, into 2024, there's a lot to be excited about. Besides the generally cautious market, we do see that bike retail inventories are back to healthy levels and we have seen good growth now for two quarters in bike-related products, which is, of course, positive for the bike season coming up during spring. And besides that market environment, we also have a lot of great new Thule products coming out in 2023 in this category, particularly on the theme of upgrading already existing great products or market-leading bestsellers. For example, we are replacing the world's most sold rooftop box Thule Motion XT with a new generation, Thule Motion Generation 3. We are replacing our best-selling U.S. bike carrier with an even more premium hitch-mounted bike carrier, and we also have a full year of the Thule Epoch that was launched in spring 2023. Turning to page 11, our second biggest product category, RV Products, has developed in the other direction during the year, where this is Thule Group's historically only exposure to a cyclical segment and we expected a decline and it materialized during Q3 and has continued in Q4. So the second half of the year saw a sales decline and that drove the full year decline of 11% FX adjusted. We did see the long-term trend of smaller vans continuing to take market share in this industry and particularly driven by younger active consumers. And we did see a continuation of strong order backlog production during the first half and continuation of a solid order production 2023 while the aftermarket sales turned negative as of H2, as of Q3. Americas is a very small part of Thule Group's RV business and saw a niche position for us, in other words, and saw a sharp sales decline in line with the industry. We expect for 2024 that this challenging market situation for the industry will continue for the coming period but we also have more new total products than ever i have never released so many new to the products in the same year as we do for 2024 and we have gotten really great reception from trade so uh to the side hill the world's first removal owning is coming in spring Thule Velotrack, which is a great new rear-door bike carrier that has capacity to take e-bikes, and Thule Veloswing, which is also a bike carrier that allows for easy and full rear-door access to swing the door open, just like the picture shows over there. Expect a continued challenging market, but a lot of great new Thule products to support the sales trend going forward. In the juvenile and pet product category on page 12, we saw, in line with the sport and cargo carriers category, also good growth during the second half of the year. And that is also, to a large extent, driven by the bike-related products in this product category. On a full year basis, the category declined by 8%, FX adjusted. Looking at subcategories, we saw that multi-sport and bike trailers, that long-term trend that we have seen for several years of increased bike commuting and e-bike commuting continues. And as bike retail inventory normalized or came back to healthy levels, also in this product category by Q3, we saw a good return, a return to good growth as of Q3 and Q4. Child bikes is a very similar development, also very bike-related. That also particularly helped by some strong new Tula products. And strollers has had a challenging year in general for the stroller market with very cautious retailers and quite a few big restructurings in bankruptcies and had a decline in 2023. This is a product category where we have a lot of new things happening in 2024. We are both upgrading several of our best sellers and we are entering new product categories, two new product categories. So first of all, the best sellers, our award-winning Tudor Chariot. We are updating that with the new Generation 3. We think the best trailer in the market just got better with several new features. Tudor Urban Glide 3 is our award-winning all-terrain stroller, also coming in new generation during spring. And on top of that, we are entering both dog transportation with Tula Allax, the car crate or dog crate for cars, designed to protect both dogs and people, and a bike trailer, Tula Bexie, coming in spring. The second new product category introduction is the car seats, which has been a multi-year effort for us and are now on track to launch in European markets starting in Q2 2024. So we're really excited about this product category report. Finally, on page 13, the fourth product category is tax bags and luggage, which had a good year in general for the two LeBrander products, but this is a product category we are consciously exiting some OE and legacy products, and that, of course, continues to see a sales decline. So looking at the Thule-branded bags and luggage, we saw really good, strong growth in the Thule backpack side, the everyday bags. We had good collections, particularly Thule Aeon drove good growth within luggage. Within sport bags and tech bags, the bags business picked up for bike-related bags, particularly as bike retail inventory levels normalized. And it's also good to see that we see really great tool-branded growth in Asia, where we have focused on driving bags growth. Again, legacy products, non-tool-branded products, camera bags, etc., continues to be phased out, and then, of course, drive sales decline. And continuing the theme with a lot of exciting new product developments, that goes for also bags, packs, bags, and luggage products. There are some positive market trends around continuing the hybrid work situation or work from anywhere. The laptop hardware shipments have picked up, which will help, hopefully, everyday bags going forward. And bike retail inventory levels are, again, back to more healthy levels. But we are also adding great new products. And not to call out everybody, all of them, excuse me. The Thule Subterra 2 is one of our products. The most leading and top-selling luggage family is getting a new collection launch soon, which we believe it will be. Continued focus on driving tool-branded growth through new products and phase-out on the non-tool-branded legacy products. And you heard me on page 14 talk a lot about new products coming out in 2024. And the reason is that we are launching more products than ever before. And we are doing this in three types of categories of products. Firstly, we are upgrading several of our best sellers. And as I've mentioned before, it goes for rooftop boxes, strollers, bike carriers, etc., Secondly, we are launching new innovations in existing categories. For example, we are launching Tula Outset, which is the world's first towbar-mounted tent, rear-of-car tent, and Tula Sidehill, which is an innovative awning. And on top of that, thirdly, we are also entering two completely new product categories for Tula with dog transportation and car seats. So it is an exciting year ahead that we are fully focused on delivering at the moment in the organization. On page 15, it is important to note that in addition to all the great product launches, we are also working hard to make them more visible to the end consumers than ever before. And this page shows an example of that. It is a first-ever Thule brand event, a product launch event that we held in November in Sweden, where we invited almost 500 customers from around the world, 70 journalists from global top media, and that has generated a lot of great both traditional media attention so far and also social media attention. providing a good support to the launches that are coming now in spring 2024. To conclude the presentation part of this call on page 16 and sum things up, our focus for 2024 is to continue to drive the long-term growth strategy that we have in place. And I'd like to mention three things. Firstly, I commented in the last quarterly report in Q3 that we had initiated work to detail our biggest strengths to be clear about what we should continue to build on. And that has been a really interesting work and made me even more convinced that our future is bright. We have a lot of great strengths to build on. And To summarize it in three, first of all, we have market tailwind. Long-term, more and more people want to live active lives. Secondly, we have really strong market positions. Thule is the global market leader in several of our product categories. And thirdly, as is evident also in this call and in this report, we continue to invest in capabilities for innovation and quality to drive competitiveness, drive the market growth, and take our market share. So our position is very strong. Secondly, we expect this mixed market dynamics to continue also in 2024. A general cautiousness of retailers and consumers is what we see at the start of the year. We expect to have a big positive and a negative. Bike retail is back to health inventory levels. We see good bike growth for Tula. And the negative is we expect the continuing challenging RV market for the coming period. Lastly, we have set clear priorities for the year. We are focused on driving sales growth and reducing inventory, and specifically four points. We will focus on product development with all the launches that we have in place. Secondly, we will focus on simultaneously winning in more categories at the same time, and 2024 is the year where we enter both dog transportation and car seats. Thirdly, we will focus on becoming more visible to the end consumer, to show more, to sell more, as we say internally, and also to continue to drive DTC. And lastly, as also commented on before, we will continue to drive supply chain efficiency. We have started to discontinue external warehouse services to reduce costs, and as Tobbe mentioned earlier, we aim to reduce inventory levels of further 200 million Swedish during the year, taking that production to 1 billion over two years. And with that, we conclude the presentation part of this call and turn to moderator to take questions.

Thank you. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now to enter the queue. When preparing to ask your question, please ensure you are unmuted locally. Our first question today comes from Gustav Hagius from SEB. Gustav, your line is open. Please go ahead.

Thanks, operator. Thanks for taking my questions. If I may start with the gross margin pickup, which was quite impressive. You mentioned in your report that the channel mix was a driver to it amongst other things. I didn't see that now in the presentation, but perhaps if you could help us sort of size the different elements driving this gross margin pickup in terms of channel and product mix, raw mass, sprite, what have you, that'd be helpful. Thanks.

Hi, Gustav. Thank you for the question. I can start. There are several things driving the gross margin in this quarter, and it is also our smallest quarter, as you're aware. The things we pointed out in various places is, of course, we continue to see lower material costs and lower freight costs, and a favorable product mix. On the other hand, could We are still in a situation where we're not utilizing our production capacity fully, which of course still limits the gross margin development to some extent.

Sure. If you were to sort of give them a rank, say that raw mats and freight are the main drivers to the pickup, or are the other elements as big of a factor?

Yeah, it's Toby. Absolutely. We listed out the three and they're the three biggest factors in that order pretty much. So it's lower material cost and lower freight cost. And then thirdly, the third biggest factor, product mix, which again, as I think we mentioned with our resales being lower this quarter, that's a factor in the product mix as well.

Sure. And if you look where sort of spot prices or your contracts are at this moment, I appreciate they can change, but where we see the world as it is today in terms of raw mats and freight with the Suez and what have you. Do you expect a similar sort of year-to-year impact going into H1, or can you help us understand sort of the bridge into the next year in terms of gross margin from these factors?

If we step back first of all a little bit, we look at the gross margin for the year, we are at a very good level compared to historicals, as you probably have not utilizing production fully, of course. We have seen for quite a few quarters material costs and freight costs coming down, and we are still selling a lot that we have on inventory to a point, so of course that should support the gross margin going forward. However, on the other hand, on the other side of the equation, we are also There are some costs, let's call it uncertainties, given the Red Sea developments, where there's been quite a drastic spike in a few weeks. We'll see where that comes out in the next couple of weeks. And then, perhaps more importantly, we are ramping up production of some new product categories. It's good to see the utilization, but of course we're also not as efficient as we are down the line when we're

Okay, great. And then if I may turn to a different topic, your launch of car seats here now in Q2. I believe that the previous ambition that was later pushed forward but presented with the CMD was that you were going to launch both a base, an infant and a toddler seat in the same quarter. Is that still the case now in Q2 that you launch all these three I guess the base and whatever you launch, but do you launch all of them at the same time, or is it more spread out?

Yes, so we will start the launch as of Q2, and with the infant seat and the base coming first, and then shortly thereafter, and we will start in selected markets in Q2, and shortly thereafter, we will roll out to the rest of the European markets during Q3, and also the toddler seat.

Okay, and... Could you help us, sort of for modeling purposes, sort of what's the ambition in terms of doors that you roll into initially, and could you give us a rough indication of what is the average inventory in a typical retailer of these products? Typically, they don't hold a lot of tool inventory, but in this category, is it any different?

I don't think the inventory position in a retailer is very different. back, you know, this is a completely new category for us, but it's not a new sales for us. We are in juvenile sales and the sellers we are talking to are aware of, you know, they have to do the products and they're aware of our supply chain model and we deliver with quick lead times, as you know. So I don't think that's going to be a big thing in terms of inventory position. What's important to us when we launch these products is to get a good start and a premium, if I could express it like that. So we worked quite hard to make sure we get to the right doors in the beginning, rather than as many doors as possible. For example, in Germany, which is the biggest market in Europe, we are also strong there. There are two retailers that are pretty much only selling child safety products, and they both have slogans similar to the tune of we don't sell car seats, we So it's important for us to be with those kind of retailers early on. It's that credibility. They provide the service to the consumer. And then from there on, more doors and distribution. But we are confident that we have distribution starting with the premium doors and then distribute to others also. And we will start that during Q2.

Perfect. And lastly, I think the initial idea was to launch US three or four quarters after Europe. Is that still the plan?

No, that is not the plan still. That will come later. And the main reason for that is that there has been work going on on the US regulatory side. which the industry is interpreting as we speak. So we have decided to push for the European deal first, and then as things have landed, set plans for exact dates for the U.S. launch. So that would be a few quarters later than what you suggested.

Okay. Appreciate that, Collar. Thanks.

The next question comes from Frederick Iverson from ABG. Frederick, your line is open. Please go ahead.

Thanks, Morning. A few questions as well. First on the juvenile markets, following up on Gustav's questions there. You mentioned, Mattias, a quite tough retail landscape, obviously, with a few bankruptcies here and there. Has this by any means impacted your plans and expectations for the car seats?

Well, I think in general, a weaker consumer market. is weaker for everything. So in the short term, yes, that may impact things. But I think for car seats, less so for two reasons. Firstly, we don't have anything today, so it's about taking market share anyways. And secondly, the premium consumer in general, including for car seats, is doing better. So, of course, we would have been even better with a strong consumer market, but for car seats specifically, this is not a big concern for us.

Okay, thanks. And then a question on product development costs. You spent, I guess, around 630 or so last year. Should we expect that figure in absolute terms to come down this year, or will it actually grow since you're pushing all these new products that you talk about?

We should expect that figure to remain largely for this year. And just to reiterate something we mentioned sometimes, when we talk about product development costs, we talk about several cost items included in that, the projects, the people, but also tooling that is required from produce most of what we sell, and we have automated factories, and they require tooling to run. So at the end of a product development process, you make the tools, and those cost quite a bit of money, and that is a big reason why we will see a largely stable product development cost in 2024 versus prior year.

Right. So when you look into 2025 and you don't have all these new products and tools or tooling, as you call it, should we expect them to come down then by next year?

Yeah, we would like to reduce the product development costs as share of sales. We were historically around 5.5%, 5, 6, and that's where we want to get back to. And with the years coming up, we have plans to get back to that level.

Okay, thanks. And a quick last question on the American end consumers, because we've I've heard a lot of cautious comments from most consumer companies when talking about the US. Can you talk a bit about this and what you see and expect in terms of your own performance in that particular region over the year?

Sure. We agree that it is a cautious consumer and for us Europe is performing better than North America specifically. In the last quarter, actually, the number was pretty good, but it's more to do with comparables. So the North American consumer is more cautious. We've seen even big retailers make some pretty negative or pessimistic statements in North America. Looking at underlying factors, there is a slight problem. particularly the U.S., but it's early and from very low levels. So we expect the cautious consumer also going forward for the coming period in North America.

Perfect. Thanks. That's helpful. That's all my questions. Thanks.

The next question comes from Adela Dashain from Jefferies. Adela, your line is open. Please go ahead.

Good morning. Most of my questions have already been asked and answered, but I do have one on the direct-to-consumer platform, especially as it relates to your product launches now into the year, both in existing and new product categories. Are you pushing more sales through this platform than you have historically at this point? And then a more general question, how have dialogues with your existing distributors and retailers changed? developed as this becomes more of an initiative for you going forward. I think I read in local Swedish media this morning that you're looking to potentially grow the entire platform to 15% of total sales by 2030. So yeah, how is the interplay between that and keeping your existing customers happy?

Thank you. Happy to answer that. It is true that we are seeing good growth in D2C. And it's an existing market, but we're also adding markets. For example, we now in the fourth quarter opened up 2D.com for online sales in two countries, Austria and Spain. And that contributed to growth already from the get-go. So for us, D2C is... maybe has played a slightly different role than for many other consumer companies. If we step back, we know that there are a lot of people who really like Tula products, and I would almost say they love the products, and they are fans, really strong advocates for the brand. But we are in many different product categories. Very few consumers are actually aware of the breadth of our offer. We've also developed a lot recently. So one important point, objective with ETC for us is to be able to connect directly with the consumer and being able to communicate, for example, the great product launches we are doing in 2024. So adding more countries, opening up to the com for sales in more countries is one step to that. We also know that a lot of consumers, particularly younger ones these days, prefer to shop from brands directly. So just opening up to the com, of course, helps. Now, this dialogue with existing customers has been very sort of positive and no drama. I think all brands pretty much these days have their own B2C channel. It's important to say that we would like to grow with the premium distribution, the premium retailers. And D2C for us is, of course, a full-price premium channel more than anything else. And reaching 15% to the last part of your question in 2030 would be a good growth for us in D2C. But we also have plans to double the total company sales to 2030. So, It's a lot of growth for the existing customers that are up for grabs as well. So we see positive comments around us supporting the premium retailers, creating a strong marketplace of full price selling and a better brand awareness.

Yeah, that makes total sense. Thanks for that. And then just on the cost base, the evolution of that as you're spending more and more on this platform, should we expect, you know, in line as with investments for product development increasing, or will that come later since product launches are the main priority at this point in time, the spike in costs for the direct consumer platform?

Yeah, hi, it's Toby here. I can just comment that, I mean, D2C has a higher overall profitability for us It does have basically a better gross profit, but we have more of our own sales and marketing costs supporting D2C, but overall it has a higher profitability.

Got it. And the investments you're making today are to support future growth, or should we see a ramp up in costs as 2024 progresses for this platform?

We have, in terms of platforms, we have the technology platform tech investment needed. And we also have, given that our supply chain model is, I would say, quite retailer-like in terms of quick deliveries, and we also don't foresee making any big investments in DC structure or other supply chain setups due to this. So we actually don't see any need for major investments in platform to drive DTC.

Yes, that answers my question perfectly. Thank you very much.

The next question comes from Daniel Schmidt from Dansk Bank. Daniel, your line is open. Please go ahead.

Yes, good morning, Mattias, Tobbe and Fredrik. A couple of questions for me, and I think you alluded to EC Comps, Mattias, when it comes to North America or the Americas. But at the same time, you do see bike-related products being up in the fourth quarter, which, of course, was not the case. In previous quarters last year... How should we view that? Have you come some way in terms of destocking among U.S. retailers or is this just temporarily or yet to be seen as we go into the high season, which is probably a month from now or a bit more?

Hi, Daniel. No, I think there are positive news in the U.S. market in terms of bikes also specifically. I mean, to explain, maybe give some more We see a cautious consumer, which is more cautious than in Europe. And we see that bike retail inventory is back to healthy in Europe as of Q3, and it's getting there in the U.S., so to speak. I would say in North America as a whole, the big retailers, they have a healthy inventory level of probably not bike-related in total, but for Tula bike-related products, premium bike-related products. So they are in line with the European situation. Whereas, now it gets a bit detailed, but whereas in the U.S., in bikes specifically, quite a large share of the bike retail market is made up of what's called independent bike retailers, small stores, enthusiast stores, mom and pops, if you like, and they still have too much. So in summary, you could say North America is moving to the same positive direction that Europe is, but is behind in terms of development.

Yeah, that's interesting because it sounds like you have a little bit more of a positive tone on that topic. That's at least my interpretation, and correct me if I'm wrong. And then maybe sort of you've talked, of course, a lot about product launches, and we'll see a lot more this year, but you already are out with the dog transportation crates. of mid-January or something like that. Any sort of initial reaction or reception remark that you want to make on that launch?

Sure. No, you're right. We launched it in Europe on Jan 31, but we had a sneak start in Sweden in mid-January. So we've been showing the product to trade enthusiasts, ambassadors, investors, Influenced in the blog industry already since the autumn and had a very positive reception in media and at events, etc. Of course, this is a very long term work for us to build up a completely new category. And it's going to take years before we are where we really want to be. So a couple of weeks of sales in mainly Sweden is not a lot. We are pleased with the start, to put it that way.

And sort of, has anything, now that you are out with the product, has any sort of revelations appeared compared to your expectations in terms of what people think about the product or any feedback that you've received, positively or negatively?

Well, I think overall, positively received, and I just noted personally at CNN last week to most look forward to 2024. So we have had some of those really positive media sites. Quite a few people like the design, but that's, of course, personal taste. What stands out with this product, which I think will take some time to... to educate some of the markets on, at least outside Scandinavia, is that it's really designed for safety. Safety for the dog, but also safety for the passenger or the person. So it is a pretty unique product in the sense that, you know, in the very, very... no hopefully never happening strong word kind of scenario of a impact or a car crash it is designed to protect the dog but also not to have metal parts flying around in the car and thereby hurting humans in the car so that whole safety aspect is quite established in scandinavia and parts of for example germany but i think Well, it's a product that really stands out. I wouldn't say that nobody else has this in total, but very few, if any, have this kind of safety level that Tula Adax provides. But I would say that the culture of prioritizing safety while transporting the dog in your car is much stronger in Scandinavia than in, for example, southern Europe or in North America. Yeah.

Okay, cool. And then maybe just a final question on your own destocking. You did a lot last year, but you want to go a bit further. Another 200 million is what you're targeting for 24. I assume that's going to be fairly front-end loaded, or how should we view that?

Yes and no. You're right about the numbers, first of all. I mean, yes, we will continue to sell down, for example, bike-related products now that season kicks in in spring. But we're also producing a lot of new products in new categories, which requires, of course, minimum safety stock and order-level build-ups. So it's not for sure that we're going to see this development through the first half of the year. Probably, actually, the net effect of this would mean that it's rather towards the second half of the year.

Okay. Okay. Thanks. That's all for me.

The next question comes from Matt List from Kepler Chevro. Max, your line is open. Please go ahead.

Yeah. Hi. Thanks for taking my question. First, regarding pricing, I guess normally you have some sort of price adjustment at the start of the year, and I guess to give some flavor regarding that, I mean, these product launches are – those the main measures for you to sort of upgrade the price level? Could you say something about that? Sure.

In general, most of the industry and Thule historically has worked on an annual price cycle being Jan 1 price increases during pandemic and after it's become more flexible and Thule has also done some mid-year price increases as of July 1. This year, as of January 1, we have decided to make no general price increases, so prices are flat for existing products. However, we of course, as we've talked about, have more new products than ever before, and they are coming in more premium at higher price points in general, so that will drive the average net sales price up for Dule with a bit.

Sorry, I didn't get that last part.

So our pricing strategy and decisions for 2024 is made out of two parts. Firstly, we have flat prices, no increases, no decreases for existing products. However, we have a lot of new products coming for 2024, which are coming in on average at clearly a premium position that average price up in 2024, driven by the new products.

And you didn't give any sort of percentage figure there, or you don't want to indicate?

No, we don't share that.

Okay, great. And then secondly, I guess, well, you have a lot of... Well, you have these new product categories, and previously there have been sort of... to try to speed up momentum, made some sort of bolt-on acquisitions to do that. But this time it doesn't seem that this is necessary since you have the retail doors already in place. Is that right?

Yes, for Tule historically we have, as you mentioned, made a few add-ons the rooftop tents or earlier many more years ago with the child bike seats and multi-sport trailers for these two where we're entering now dog transportation and car seats those are organic developments so we've done that ourselves and with great results great product coming out as a result and going forward we will continue to look at We'll have some good early ideas for organic initiatives, but of course also consider add-on acquisitions to support that growth journey.

Great. Well, finally, you touched upon the target to double sales by 2030 answer. then it seems that you have a lot of organic growth opportunities. Is that the main sort of pattern to reach that level or should we expect some acquisitions on top of that?

The main driver is organic growth. We have driven organic growth, particularly through product development for many years with great results. And that is still the foundation of what we do. We're a product-driven company. On top of that, we can drive organic growth by being a bit more visible and particularly by expanding our DTC business also going forward. And then we will also look to enter new categories, and that priority could be done either through organic initiatives or through add-on acquisitions. But in all, summing that up, it is organic growth that is the major part or the foundation of the growth strategy.

Okay, thanks a lot.

The next question is from Kari Vinter from HB. Kari, your line is open. Please go ahead.

Yeah, thanks, Karri. First, a quick housekeeping question. Admin costs were lower than they have been for a while. Is there anything of one of nature there bringing these costs down? Or is this what we should expect going forward?

No, I mean, in the court before, admin costs were a little bit lower than prior year, but that's just keeping control on cost. There's no special items there.

All right, good, thanks. And then the outlook for RV. Can you remind us of how much of your RV sales go to when the RVs are being manufactured and how much is a pure aftermarket business for you? And do you expect the same outlook for both of these segments in 2024?

Yes, that is a multifaceted question, but A bit more on the aftermarket side than the OEM. So a bit more than half on aftermarket, but not much. A little bit more than half. The outlook is, you know, we expect it is a cyclical industry. Last time we saw a cyclical downturn that lasted for about two years before we saw a pickup. For a few reasons, the industry and we believe that it doesn't have to be two years this time. It could go quite a bit quicker. Hopefully more around one, maybe one and a half year time frame. And the dynamics, to your point, is a bit different between OEM and aftermarket. So, for example, In Q4 and now in Q1, several of the OEMs are coming out with new models, and of course they produce them to put them either in their own stock, but really best they can put them in the dealer's stock, so at least the consumer has some newness for the ones that are interested. That will keep OEM volumes up better for both Q4 and Q1 than the aftermarket. The developments on a quarterly basis will be varying between the two channels.

All right. Thank you. That's very helpful. That's all for me. Thank you.

We have a follow-up from Gustav at SCB. Gustav, your line is open. Please go ahead.

Thanks. Thanks for taking another question. Could you expand a little bit on R&D? If I recall, 2018 to 2020, when you also had a big launch of conventional strollers in 2018, right? You had slattish R&D around 400 for three years before you took a step change coming through. And it seems like it's plateauing now in terms of actual value. So going into 2024 and also sort of quarter by quarter, what do you see in terms of R&D going forward? And maybe 2025, if you have a view, that would be helpful. Thanks.

And I think to answer best, we just need to explain again, just for everybody's information, what's included in the R&D costs. At Thule, we include the R&D, the project, of course, people and prototypes and design work, all that, but also tooling that goes into then later producing the product. At Thule, we produce most things ourselves that we sell. And at the end of a product development project, we produce tools that go into our factories and our typically automated equipment to make parts and assembly. So at the end of a product development project, there is quite a bit of cost that is taken as G&A. We have had a big multi-year effort of car seats going on for quite a few years now, and that is, as we've talked about before, coming to launch now in Q2. And we expect that the R&D expenses are largely flat in money in 2024 versus 2023. And, of course, you're going to see quite a bit of costs early in the year or the first half of the year because of the reason for creating tools as i alluded to earlier so so that's that over time we have been at the r d cost to sales of around five and a half percent between five and six i would say and it is our plan to go back to to that level of course help buy stronger sales but also to make

And you think that normalized level, is that a 2025 ambition of yours or a H224 ambition even?

I would be very honest there, Gustav, and say that depends on the market development and the pickup. I think most consumer companies, including us, think that once interest rates come down, durables and consumer sentiment will pick up. And if that happens, first half of 24, second half of 24, first or second half of 25, I think we don't speculate in that. But that will play in when it comes to the sales uptick and therefore percentage.

Okay, great. Thanks.

We have a follow-up from Daniel Schmidt from Danske Bank. Daniel, your line is open. Please go ahead.

Hello, Mattias, again. Could you just shed some more light on what you said and I think you mentioned it once before when it comes to regulatory changes in the U.S. that are postponing the launch of car seats for your sake a couple of quarters. Could you describe what's happening on the regulatory side?

Sure. To the best of my core seat's ability, I will explain. But there's been some, call it regulatory or industry association discussions on safety standards and specifics and how that plays out. And then there are also commercial aspects of... I mean, in Europe, we pretty much separate between an infant and a toddler in a certain way, and... that distinction and mid-segment and cut-off points is also a potential change depending on where these safety standards and regulatory come out. So it's not a super specific question to your question, Daniel, but discussions around standards and regulatory have commercial impacts for the product, and therefore we wanted to wait and see how that plays out. which way the industry is leaning before we move full steam ahead on an R&D project. As we just talked about, they're quite costly projects. We are an entrant, and we want to come in in the right way.

Yeah, that makes perfect sense, of course. But would you say that these changes possibly are sort of raising the barriers to entry, so to speak, that the market in the US would require more safety simply to be part of the product than it has been, which I would assume would be a good thing if that's the case for you guys.

We agree with you. We are hoping that that is the way that the market is developing in these current discussions, but also generally going And to be frank, we have a pretty good view by now where things will land. So now when we are soon out with the European products here by Q2 and then rolling out in Q3, we will be ready to set full focus on the U.S. plants.

All right. Thank you. That's all for me.

We have no further questions in the queue, so I'll hand the call back to the management team for any concluding remarks.

Thank you, everybody, for joining this call. Have a great day and speak to you at the Q1 update.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.