Thule Group AB (publ)

Good morning or good afternoon, I'm 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 1 on your telephone keypad. I will now hand the floor to CEM and President Matthias Ankeberg 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, Tobias Lorten. Some of you have met Tobias 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 2 and with the overview, the quarter delivers a solid result in what is still a tough market as it was in Q3. Sales declined .6% and 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 Tula products continue to drive growth also in a tougher market. EBIT improved a lot versus last year, 53 million versus 4 million last year and the cash flow is particularly strong in the quarter with 276 million. Turning to the full year, what stands out is really the cash flow. Sales was down minus 15% and 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. EBIT margin was somewhat below last year, .5% versus .8% and all-time high cash flow from operating activities at almost 1.9 billion Swedish. The ordinary dividend proposed to the HM is SEK 9.5, 9.50 per share. Tula is in a financially strong position. We have always generated a lot of cash flow and particularly so in 2023. We are focused as a company on how to use the shareholders funds in the best way. 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 SEK per share. On page 3, turning to the reported net sales and EBIT figures, in the quarter, a decline of 16.51 to 15.66 in reported Swedish millions and a corresponding EBIT increase of 253 million from 4 versus last year. For the full year, which I haven't talked too much about yet, the 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, well, almost the same 16.8 last year means 1.5 billion in EBIT versus 1.7 last year. On page 5, 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 Tula bike-related products, and bike-related products is a big part of Tula these days, so that's of course very positive for us to see. On the minor side, the RV, recreational vehicle industry, is 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 the winter quarter, however the RV sales is fairly flat then. That comes out as a small positive growth in Q3, but in a different mix, a negative in Q4. We will turn to page five and talk about sustainability. Tula 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 Tula Epoz, 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. 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 product. So good to see the progress in CO2 reduction, and of course a lot more work remains. Another key area for Tula 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. And we have invested equivalent of .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 Tula products drive growth, also in the tough market. And secondly, we have, thanks to these investments, more new products than ever before come into 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 some order.

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 will 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 .2% or .6% FX adjusted. 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 .9% versus .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 at EBIT margin, you can see EBIT is .5% versus .8% last year. So pretty much in line with prior 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 the net profit on the bottom for full year, we generated just under 1.1 billion SIC of net profit. If I flick 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. But 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 contributing 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 SIC. 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 SIC 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 activities. We first 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 SIC, so 1.85 billion SIC. So a very strong cash flow. And this is more than 1.2 billion better than prior year. And again, driven

to

some extent by, and a large extent by, the reduction in inventories, but also the strong cash flow generation from the underlying business. So with that, hand back

to

the

representatives. Thank you, Toby. We are now on page nine. And we will turn to reviewing the performance in our product categories. Page nine 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 has 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 TULU products. And TULU Epoch, 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 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 rooftop tents continued to grow throughout the year, also supported by the launch of the new TULU 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 TULU products coming out in 2023 in this category, particularly on the theme of upgrading already existing great products or market-leading best sellers. For example, we are replacing the world's most sold rooftop box, TULU Motion XT with a new generation, TULU Motion Generation 3. We are replacing our best-selling US bike carrier with an even more premium hitch-mounted bike carrier. And we also have a full year of the TULU Airbus 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 TULU Group's historically only exposure to a cyclical segment, and we expect their decline and immaterialized during Q3 and has continued in Q4. So the second half of the year saw sales decline and that drove the full year decline of 11%, FX suggested. 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 a 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 TULU Group's RV business and so a niche position for us, in other words, and so 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 TULU products than ever. I have never released so many new TULU products in the same year as we do for 2024, and we have gotten really great reception from trade. So TULU Sidehill, the world's first removable awning, is coming in spring. TULU VeloTrack, which is a great new rear door bike carrier that has capacity to take e-bikes, and TULU 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. So expect the continued challenging market, but a lot of great new TULU products to support the sales trend going forward. In the juvenile and pets 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% effects adjusted. Looking at subcategories, we saw that multi-sport and bike trailers, a 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 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 TULU 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. First of all, the best sellers, our award-winning TULU 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. TULU Urban Glide 3 is our award-winning all-terrain stroller, also coming in new generation during spring. On top of that, we are entering both dog transportation with TULU Alex, the car crate or dog crate for cars designed to protect both dogs and people, and a bike trailer TULU 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. We are really excited about this product category forward. Finally, on page 13, the fourth product category is tax bags and luggage, which had a good year in general for TULU branded products, but this is a product category where we are consciously exiting some OE and legacy products and that of course continues to see a sales decline. Looking at the TULU branded bags and luggage, we saw really good strong growth in the TULU backpack side, the everyday bags. We had good collections, particularly the TULU Aeon drove good growth within luggage. Within sport bags and tech packs, the bags business picked up for bike-related bags, particularly as bike retail inventory levels normalized. It's also good to see that we see really great TULU branded growth in Asia, where we have focused on driving bags growth. Again, legacy products, non-TULU branded products, camera bags, etc. continue to be phased out and then of course drive sales decline. Continuing the theme with a lot of exciting new product developments, that goes for also bags, bags, bags and luggage. 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 have 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 all of them, excuse me, the TULU Subterra 2 is one of our most leading top selling luggage family lists and is getting a new collection launch soon, which we believe in. So, continued focus on driving TULU branded growth through new products and phase out of the non-TULU 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 TULU Outset, which is the world's first tow bar mounted tent, rear of car tent and TULU Side Hill, which is an innovative awning. And on top of that, thirdly, we are also entering two completely new product categories for TULU 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. This page shows an example of that. It is a first ever TULU 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 launchers 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. I would 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. That has been a really interesting work and made me even more convinced that our future is bright. We have a lot of great things to build on and summarize it in three. First of all, we have market tailwind. Longer term, more and more people want to live active lives. Secondly, we have really strong market positions. TULU is the global market leader in several of our product categories. 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. 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 healthy inventory levels. We see good bike growth for TULU 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. 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. 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 Tobi 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. We're preparing to ask your question. Please ensure you are unmuted locally. Our first question today comes from Gustav Hegius 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 report. Could you please explain 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.

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 product mix on the other hand of things and continued growth in DTC to your point. On the other hand of things, as we talked about in Q3 and several times during the year before that, 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 the meringue, say that raw mass and fright of the main drivers to the pickup or are the other elements as big of a factor?

Yeah, it's Toby, Gustav. Absolutely. We listed out the three and they're the three biggest factors in that order pretty much. So it's low 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 is today in terms of raw mass and freight with the SWES and what have you. Do you expect a similar sort of -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 seen and that is in a situation where we are not utilizing production fully of course. We have seen for quite a few quarters material cost and freight cost 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 freight costs, so let's call it uncertainties given the Red Sea developments where there's been quite a drastic spike in a few weeks. So we'll see where that comes out in the next quarters and 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 produce things so that will burden the gross margin a little bit. But the good trends that supported us in Q4 should continue to support us also in the coming quarters.

Okay, great. And then if I may turn to a different topic, your launch of the new 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're 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 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? What's the ambition in terms of the scores that you roll into initially and could you give us a rough indication of what is the average inventory in a typical retailer for these products? Typically they don't hold a lot of to the inventory but in this category is it any difference?

I don't think the inventory position in a retailer is very different from strollers or anything else and again stepping back, this is a completely new category for us but it's not the new sales for us. We are in juvenile sales and the sellers we are talking to are aware of, they have to do the products and they are 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 change 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 sell child safety so it's important for us to be with those kind of retailers early on. They provide the service to the consumer and then from there on more doors in distribution but we are confident that we will have distribution starting with the premium doors and then distribute to others also and we will start that during Q2.

Perfect and lastly from 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 still some work to be there has been work going on on the US regulatory and aside which the industry interpreting as we speak so we have decided to push for the European view first and then as things have landed set plans for the exact dates for the US launch so that would be a few quarters later than what you suggested.

Okay appreciate that a caller.

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 that there's 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 and the tougher retailer environment you know 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 I mean we don't have anything today so it's about taking market share anyways and secondly the premium consumer in general and including for car seats is doing better and premium car seat industry is doing premium car seat segment is doing better than the car seat industry in general so of course we would have been even better with 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 cost you spent I guess around 6.30 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 you know 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 production I mean we produce most of what we ourselves and we have automated factories and they require toolings to run so that at the end of a product development process you make the tools and those costs quite a bit of money and that is a big reason for 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 cost as share of sales we were historically around five and a half percent five six and that's what we want to get back to and with the years coming up we have plans to to get back to that level.

Okay thanks and a quick last question on the American end consumers because we've heard a lot of cautious comments from most consumer companies when talking about the US so 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 due with 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 positive increase in consumer sentiment and some of those related sort of confidence metrics in particularly the US 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 Dasheen from Jeffreys. Adela your light is open please go ahead.

Good morning most of my questions have already been asked and answered but I do have one on the 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 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 percent 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 DTC and it's an existing market but we're also adding markets for example we're now in the fourth quarter opened up to the dot com for online sales in two countries Austria and Spain and that contributed to growth already from the get-go. So for us DTC 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 DTULA 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 and very few consumers are actually aware of the breadth of our offer. We've also developed a lot recently so one important objective with DTC 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 DTC channel. It's important to say that we would like to grow with the premium distribution, the premium retailers and DTC for us is of course a full price premium channel more than anything else and reaching 15 percent to the last part of your question in 2030 would be you know a good growth for us in DTC 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 the cost base the evolution of that that you as you're spending more and more on this platform should we expect then 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 despite in costs for the directing consumer platform.

Yeah hi it's Toby here I can just just comment that I mean DTC has a higher overall profitability for us it does have basically a gross profit but we we have more of our own sales and marketing costs supporting supporting DTC but overall it's it has a 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 progress for this platform?

We have in terms of platforms we have the technology platform in place it's maintenance and you know selected to upgrade as always but there's no new 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 we also don't foresee making any big investments in the DC structure or other supply chain setups due to this so we actually don't see any need for major investments in platforms to drive DTC.

Yeah yes that answers my question perfectly thank you very much.

The next question comes from Daniel Schmidt from Danseke Bank. Daniel your line is open please go ahead.

Yes good morning Mattias, Toby and Fredrik. A couple of questions for me and I think you alluded to easy 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 do how should we view that? Have it come some way in terms of destocking among US retailers or is this just temporarily or yet to be seen as we're going and go into the high season which is probably a month from now or a bit more?

Yeah hi Daniel. No I think there are positive news in the US market in terms of bike also specifically. I mean to explain maybe give some more color in general 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 US 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 US in bike specifically quite a lot 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 you could in summarize you could say North America is moving to the same positive direction that Europe is but is behind in terms of development.

Yeah but 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 Okay and then maybe sort of you've talked of course a lot about the product launches and we'll see a lot more this year but you already are out with the dog competition crates of mid-January or something like that any sort of initial reaction or reception remark that you want to make on 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 have we've been showing the product to trade enthusiasts you know ambassadors influenced the people in the 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 it's not that we are pleased with the start to put it like

that. 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 see or positively or negatively?

Well I think overall positively received and I just personally see it last week had it on its list of gear 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 what this 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 you know 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 it's a product that really stands out I wouldn't say that nobody else has this in total but very if any have this kind of safety level that the Tula Alex 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 in North America yeah

okay cool and then maybe just a final question on on your own de-stocking 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 in spring but we're also you know creating producing a lot of new products in which requires of course you know minimum safety stock and an order level build up 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 it's rather towards the second half of the year

okay okay thanks that's all for me

the next question comes from Matt Liss 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 are those the main measures for you to to sort of upgrade the price level or could you say something about that

sure in general most of the industry and Tula historically has worked on an annual price cycle being Jan one price increases during pandemic and after it's become more flexible and Tula has also done some mid-year price increases of July one this year as of January one 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 Tula with a bit

sorry I didn't get the 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 will drive average price up in 2024 driven by the new products

and 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 this new product categories and and previously have been sort of well 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 already in place is that right

yes so for for Tula historically we have as you mentioned made a few add-on or bolt-on acquisitions particularly to enter new product categories like we did with the rooftop tents or earlier many more years ago with the child bike seats and the multi-sport trailers for these two where 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 entering more product categories and we will have some good early ideas for organic initiatives but of course also consider add-on acquisitions as to to support that growth journey

great and well finally you touch upon the you have the target to double sales by 2030 and 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 some acquisitions on top of that

the main driver is organic growth we have done that 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 in by being a bit more visible and particularly by expanding our DTC business also going forward and then you know we will also look to enter new categories and that in 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 the growth study

okay thanks a lot

The next question is from Kari Dinser from HB. Kari your line is open please go ahead.

Yeah thanks Kari, 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 the what we should expect going forward?

No I mean in the quarter four 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 same outlook for both of these segments in 2024?

Yes that is a multifaceted question but to start with a simple answer historically we have been a bit more on the aftermarket side than the OEM so a bit more than half on aftermarket and 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 it was 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 the 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 is has some newness for the ones that are interested that will keep OEM volumes up better for both it did for both Q4 and it will for Q1 than the aftermarket so 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 we just could you expand a little bit on on R&D if I recall 2018 to 2020 when you also had a got a big launch of conventional strollers in 2018 right you had flat-dish R&D around 400 for three years before you took a step change coming through and seems like it's plateauing now in terms of actual you know value so going into 24 and also sort of quarter by quarter what do you see in terms of R&D going forward and maybe 25 if you have a few that'd be helpful thanks

sure and I think to answer best to just need to explain again just for everybody's information what's included in the R&D costs at Tula 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 project product sorry the Tula 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 in our typically automated equipment to to make parts and and then assembly so so at the end of a product development project there is quite a bit of cost that is taken as GNA we have had a big multi-year effort of car seats going on for the quite a few and that is as we've talked about before coming to launch now in 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 tie stronger sales but also to make you know the right proactive decisions on R&D for where to invest

and you think that normalized level is that the 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 pick-up I think most consumer companies including us think that you know once interest rates come down durables and consumer sentiment will pick up and we will see a good sales uptick and if that happens uh first half of 24 second half of 24 first or second half of 25 I think you know we 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

there's a little bit here again could you just shed some more light on what you said and have I think you mentioned it once before when it comes to regulatory changes in the US that are they're postponing the launch of car seats for your sake a couple of quarters could you could you describe what's happening on the on the regulatory side

sure to the best of my car seats I will explain but there's been both been some call it regulatory or industry association discussions on safety standards and the specifics and how that plays out and then there are also commercial aspects of uh I mean in in Europe we pretty much separate between an infant and a toddler in a certain way and that distinction and mid segment and cutoff points is also a a potential change depending on where these safety standards and regulatory come out so it's it's a 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 and which way the industry is leaning before we 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 right 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 is the way that the market is developing you know in these current discussions but also generally going forward we we are fully convinced that we'll speak very favorably for for Tula 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 on the US plans

all right thank you that's all for me

we have no further questions in the queue so I 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

headphones