Thule Group AB (publ)

Good morning, everyone, and welcome to the Thule Group Interim Report Q1 2024 conference call. My name is Chach, and I'll be coordinating your call today. During the presentation, you can register to ask a question by pressing star, fold by one on your telephone keypad. If you change your mind, please press star, fold by two. I'd now like to hand over to Matthias Ankerberg, CEO and President, to begin. Matthias, please go ahead.

Thank you and welcome everybody to this Q1 conference call. I am here with Toby Lawton, our CFO as usual. And we will talk to a presentation available on our website or on the webcast and then we will follow with questions. So starting on page two, we're happy to see a good start to the year of 2024. 8% sales growth and currency adjusted with Europe and the rest of the world continuing to perform a bit better than the Americas. Bike-related drives growth for us, new products drive growth for us, and RV products continue to decline. We have a very good gross margin, flat versus previous year and at a high level compared to historical trends for the first quarter. And also the EBIT margin is in line with last year at 17%. then this is considering that we are, as you probably are aware, in the most intense product launch year and season in the Thule Group history. Continue to see good development in inventory reduction and in cash flow from operations. And we have a target to reduce inventory of a further 200 million this year, and we are on track. Some highlights worth to mention already from the start is our well-received product launches, which we will come back more to, of course. We continue to expand our D2C channel to more markets, and we've added one more this quarter to the Czech Republic. And we've also received more product design awards than ever before in Thule history, which we are, of course, happy and proud of. Move to slides. On slide three, we can also see that it's nice to see that on a rolling 12 basis, we are also back to growth. Thule has had a long history of both sales and EBIT growth for several years. And then, of course, we had a big boost during the pandemic and the decline that followed that. But now we see the better second half of 2023 and a good growth in the first quarter of this year, we can see that on a rolling 12 basis, last 12 months, we are growing and net sales amount to 9.3 billion. We have an EBIT of 1.5 billion SEC and an EBIT margin of 16.5%. Turning to page four, in addition to what I described as a generally cautious market, we see some specific drivers of our sales trends this quarter, and I alluded to them in the beginning. We continue to see bike-related products driving growth for us, new products driving growth for us, and RV to decline. But since we are a product-oriented company, we'll go through this and see how this plays out across our four product categories for the quarter. So starting with our biggest product category, sports and cargo carriers, we clearly see a good uplift from bike-related products. In the quarter, net sales increased by 16% compared to previous year, adjusting for foreign exchange rates. We continue to see a good development in the premium end, particularly of bike-related products. Inventory levels for bike retailers are still challenged in bike industry as a whole. But for the Thule products, the Thule end of the market, we see healthy inventory levels again, particularly in Europe. We also see that new Thule products drive growth also in addition to the general market recovery. For example, our most premium bike carrier Thule Epos launched during Q2 last year continued to drive growth for us also on an analyzed basis. Most subcategories actually within sport and cargo carriers are doing well in this quarter, and particularly so in the Europe and rest of the world region. Within packs, bags and luggage, we continue to see good growth, just like last year and also many years before of the Thule branded products, whereas our legacy products, as we call them, OE and And other historical product categories that we are exiting, of course, continues to decline. So, we also see very good performance in our Thule branded products from some specific product launches. We have launched an updated collection of our best-selling luggage collection Thule Subterra, Thule Subterra 2, which has been very well received and really helped growth in this category in the quarter. and also an updated collection for our most popular duffel bags, Tula Chasm, which also is doing well in the quarter. In addition, we note that bike-related products, bike-related bags, that is, do well also in this category in the quarter. Turning to the next page, page five, and continuing with the product category number three, Juvenile and Pet, It's been a focused category for us for this quarter with several product launches and see good growth of plus 9% compared to previous year. We see very good growth in strollers, very much driven by our newly launched best-selling all-terrain stroller Tool Urban Glide 3, which has been very well received in the market and by consumers. Now also available in a four-wheel edition and driving really nice growth in this category for us in the quarter. We've also launched our first product within dog transportation, our dog crate tool, Alex, which of course also contributes to the growth in this quarter. So nice to see a positive development of plus 9% in juvenile and pet. And then just as in previous two quarters, RV products continue to decline as the industry continues to go through a weaker period. And as a reminder, RV products is the segment or Tula's only segment where we have exposure to an historically cyclical sector. And we note that the industry is still going through a tough period, but our sales is declining less than it did during the autumn. So as customers build up inventory ahead of time, Spring season, that helps us for the first quarter specifically, and the sales development was minus 5% versus previous year. In addition, on the next page, I'd like to highlight the record number of product design awards that we had received at the beginning of 2024. We are, of course, proud of our product as a product-oriented company. And there are two major product, international product design awards, IF Design and Red Dot Design. And throughout history, two previous years combined, received 29 awards. And this year alone, we received another 23, which we are, of course, really proud of. And I'm also personally really happy to see that we get design awards both for updating existing bestsellers and for new products in new product categories that we are launching all this year. So several good awards and recognitions to our very strong product development team who are well-deservedly recognized. We also see, if you note, particularly two special awards both from IF Design, Gold Award and the Red Dot Award for best of the best two-hour all-terrain stroller to urban glide three, which, as I just mentioned, also performed well in terms of sales. And with that, I hand over to Toby to cover financials.

Thank you, Matthias, and good morning, everybody. So if we turn to the next slide on the income statement. And here you can see the last four quarters on the left of last year, and then quarter one, 2024, the right-hand column, which I will focus on. And starting with the top line here, net sales, we saw, as Matthias has already presented, a growth of close to 200 million in net sales, which was an FX-adjusted growth of 8%, so organic growth of 8% in the quarter. Gross margins. which you see on the fourth line, gross margin was 41.2%, the same level as we had quarter one last year. And here we have some positive effect from favorable product mix. When we are strong in bike, that is a favorable product mix for us. We have some lower material costs versus Q1 last year, also positive. And then we have a negative effect from what what I describe as unfavorable production overhead absorption. And this is really the impact of the fact that what we're selling now in quarter one 2024 was produced during 2023. Typically, products take six months to get from production to the market or through inventory and to sales. So there is some time lag. And during 2023, we had relatively low production levels as well. So that impacts production overhead absorption. When it comes to the EBIT margin, you can see we are on 17%, close to the same level as last year. And here we have a higher gross income, which is generated by the higher sales and the gross profit on the higher sales, which is good. And then we have a higher selling and administration expenses of 50 million in the quarter versus quarter one last year, which is as expected and as we've talked about, where we have higher costs supporting the new product launches, which are happening this year. And that's an effect we expect to see during the first half of this year, as we've previously talked about. Then finally, just going down, the tax rate is stable, 23.7%. And then net income for the quarter is 300 million SEC. If I turn to the next slide, just showing the cash flow. And here, At the top, I've shown the cash flow from operations before changes in working capital. And here you can see we had 390 million in quarter one, so a good cash flow generation from operations in quarter one. We then have changes in working capital where we have a seasonal increase in working capital in quarter one. The biggest impact here is from accounts receivable, where we have an increase of 519 million in quarter one. And this is basically because of the growth in sales during quarter one with the seasonal impact, which will be collected then during quarter two. And then inventories, where we've seen a good reduction in quarter one of 173 million. So we're on track towards our target for the year to reduce inventories by a further 250. million on top of the 800 million we reduced in 2023 then underneath the cash flow from operations i've just also shown the line for for capex and what we've invested in the quarter so we invested 32 million sec in in quarter one and those are all the main impacts that are impacting our net debt so in total if i make a subtotal there you see we had positive 57 million in quarter one So our net debt is basically stable at the end of Q1 versus the end of last year, just over 2 billion SEK, and then net debt to EBITDA margin is also stable at 1.1 times. So with that, yeah, I'll hand back to Matthias.