Thule Group AB (publ)

Good morning, everyone, and welcome to today's Tula Group Interim Report Q3, July to September 2024. My name is Drew, and I'll be your operator today. During today's call, there will be a Q&A session. To register a question, please press star followed by one on your telephone keypad. And if you wish to withdraw your question, then it's star followed by two. I'll now turn the call over to Matthias Ankerberg from CEO and President to begin. Please go ahead.

Thank you very much and welcome everybody to this quarterly call. I am also joined here as usual by Toby Lawton, our CFO, and we will speak to the presentation also available on our website. I'll start off on page two. The third quarter of the year is a good quarter for us despite the continued tough consumer market. We grow by 4% organically in the year. more in region Europe and the rest of the world, 6% and 1% in Americas. We'll get back to market conditions, but we continue to see a better market in Europe than in North America. And we continue to see the growth coming from new Tula products, driving growth, even though the market is tough, and also from bike-related products where the market is better. We have a strong gross margin of close to 43% in the quarter, and we have an EBIT margin of 17.6%. which is the highest ever EBIT margin for a third quarter for Thule Group, excluding the pandemic period years. And the total EBIT in absolute terms was 413 million. And Tobbe will get back to that as well. Cash flow remains strong as for the last couple of quarters. And we have cash flow from operations of almost a billion Swedish kronor in the quarter. A couple of highlights for the quarter, and the first one is actually after the quarter finished. Yesterday, the semi-annual consumer test results from Europe's most important car seat test was announced, and Thule was the winner in the so-called ADAC car seat consumer test. That's the big one in Europe, so we are very pleased and proud to win that. We have also continued to launch products in our second new category for the year, dog transportation. So we launched Tule Peksi. And we have also continued to grow our DTC business and have so far now opened six new countries for trading with OnTule.com, with two more opened in the third quarter. On the next slide, page three, we'll summarize the long-term development for Tule Group and For those of you who know us well, you know we've had a good profitable growth for many years. The graph shows the development since the IPO in 2014. And following two years with sales declined after the pandemic peak, we are now continuing to see another quarter adding to growth in 2024. Good to see that this year is back to good profitable organic growth. On a 12-month basis, net sales is 9.4 billion for the group. 1.6 billion of EBIT and an EBIT margin of 17.1%. Turning to page four and going a little bit deeper into the trading in the quarter by category, we can see that several of the trends we've been seeing for the year continued in the third quarter with some nuances and some updates also related to us launching new products. So starting with our biggest product category, sporting cargo carriers, the category grew by 5%, currency adjusted in the quarter, 6% year-to-date, and we continue to see that bike-related drives the growth. Particularly, we see premium bike-related products doing really well. We have launched two new products in the quarter, one niche product, which is sewn on the picture, which is a so-called vertical hanging bike carrier, mainly for the Americas market, which has done well. We've sold everything we've been able to produce so far. We continue to see very good sales of our most premium bike carrier tool, EPOS, that was launched last year. And we've also, at the end of the quarter, upgraded our best-selling tool, Easy Fold bike carrier, which also has a really nice start. So good growth in the premium bike-related products. Overall, the market for sport and cargo carriers continues to be tough with both cautious consumers and retailers, more so in North America than in Europe, but also in Europe. But we, as we've seen now for several quarters, do see more healthy inventory levels in the bike sector, particularly around premium products and particularly in Europe, which helps us. Pax bags and luggage declined by 4% in the quarter and 1% for the year so far. We continue to see good growth in Thule branded luggage and duffels. For example, the updates we've done this year to the Thule Aeon and Thule Subterra products. And we also continue to see good growth in bike-related bags products. But we also, as previous quarters, see decline in legacy products as the exit of those categories continues. If we move forward to page five, we'll cover the last two product categories. The strongest growth in any product category in the quarter was in juvenile and pet, which where net sales increased by 15% and 9% for the year. And this is the category we've had a lot of newness this year. We, in the quarter, launched an updated generation of our multi-sport and bike trailer, Tula Chariot, which has been really well received by the market and the consumers and driven very nice sales growth for us in the quarter. We did a big update to our new generation Tula Urban Glide 3 during earlier part of the year, which continues to perform really well. And we see good growth in strollers also in the third quarter. Dog transportation is a new category for the year. We continue to see good performance of the dog crate Tula Alex and continue to take market share. And we also launched Tula Bexy, our first bike trailer for dog transportation in the quarter which also added new sales and last but not least we have entered into car seats we moved into three markets germany austria switzerland at the end of may and then added belgium and netherlands and luxembourg in september which also of course adds new sales in this category so good lot of newness and 15 sales growth in juvenile and pet in the quarter which we are pleased about RV products is a mixed picture. Net sales in total were flat compared to last year in RV products, and it's down 2% year to date so far. As we've talked about several quarters earlier, the RV industry is going through a weaker period, but we do see two opposite trends in the quarter where we see a decline in sales to oe customers manufacturers and vehicle outfitters but that sales decline is offset by return to growth in the dealer channel the channel that is closer to to the consumers so overall resulting in a flat development particularly we also see in this rv category that the growth is mainly coming from bike related products in the aftermarket channel So I'd like to then on page five, sorry, six, give you a bit of a further update on the car seats launch. And firstly, just to let you know where we are, we have continued the launch with the first products was in the market in May. And we'll continue the launch in the third quarter and we'll continue in the fourth quarter. So before stepping into the timeline, maybe just to remind everybody that we are a product-oriented company. Our primary focus is to deliver a great product up to the standard. And we do feel we have launched innovative products in a fairly established product category. We clearly focus on safety. We clearly focus on ease to use. And we also think, at least by design, But in our view, that we have produced a product which is well designed. So overall, three products launched to the market end of May. A base, an infant seat and a toddler seat in Germany, Austria and Switzerland. Good reception, six international product design awards even before the product was launched. And then the rollout continued with opening up Belgium, Netherlands and Luxembourg during September 2024. We've had, just as in the German-speaking markets, a nice reception. We've had good placement with the most important premium retail partners that we are looking to enter with. We've had good positive receptions with PR, both more juvenile-focused media, but also broad media, and also with ambassadors. The rollout will continue across European markets and a few others connected to the European standard. So over 20 countries now in November 2024. And it's nice to see the good start and the good reception. And now the long-term work to build these market positions will continue. And as a last comment, also say that we do have more products in the pipeline, both for the European and the North American markets. And we will, in 2025, launch our first high-back booster seats for children of a little bit higher age. On the following page, page eight, also take the opportunity to update you on the outcome of the so-called ADAC test, the most recognized car seat consumer testing in Europe and probably the world, which was announced yesterday. And this is the big one. And we are very proud to say that Thule came out as the winner in the test. The test is based on three areas. It's safety, it's ease of use and it's ergonomics. and the products are scored on a scale from 1 to 6, 1 being the best, and Thule received a 1.6 score for the combination of the Thule Maple and the Thule Alfie, the infant of the base bundle. This is the best score of any product tested in this October 2022 test, which is, of course, makes us the winner, but it's also the best score of any product ever tested of this product type, so We are really proud of the team. I think it's a great testament to the product development capabilities of Thule Group. And I think it's a milestone for us in the car seats category and as a brand. So a good start and a good recognition for the car seats early on. And with that, I hand over to Toby to cover financials in a bit more detail.

Thank you, Mattias. Good morning, everybody. And we can turn to the income statement, slide eight. And I'll start off showing you here the revenue in quarter three. We had a revenue of 2.344 billion SEC in the quarter, which was an organic growth or an FX adjusted growth of 4%. which means our year-to-date FX adjusted organic growth is also at 4%. Moving down the table to the gross margin, you can see we had a gross margin in the quarter of 42.9%. This is 2.8% up versus last year. The positive trend in gross profit continues. We have effects from lower material costs, which is the biggest impact. Also some better mix, which is driven by the new product launches in premium price points, which Matthias has talked about. And also some better overhead absorption from better production levels this year. If you move down then to the EBIT margin, you can see the EBIT margin in Q3 improved by 2.1% versus last year. And this is driven by the higher gross margin. And finally, just on the right-hand side, you can see for the year-to-date numbers, if I move to the year-to-date column, net interest expense was 59 million so far this year. Taxes, 339 million, which is an effective tax rate of 22.6%, so very stable effective tax rate. And then net income year-to-date for the year is now 1.159 billion SEC, so well over a billion SEC in net income so far this year. If I flick on to the next slide, slide nine, sales by quarter. And the first thing to point out here is you see the seasonality of the Tula business. You can see quarter two is actually our biggest quarter. So quarter three, which we're reporting now, is the tail end of the season. And I can also point out, obviously, that Q4, the coming quarter, is clearly the smallest quarter of the year. And it's the summer season in the northern hemisphere, of course, which drives this for us. And if we look at the growth rates for quarter three, you can see in the box on the right that the reported currency growth was 1%, but FX adjusted its 4% in the quarter, so 4% organic growth again, and versus 2019, which is the pre-pandemic period, then it's a 30% growth. If I move on then to the cash flow, slide 10, And here you can see that we had clearly a strong cash flow generation in the quarter. If you see the line cash flow from operations in the quarter, we had 955 million SEC in cash flow generation. And this was driven by reduction in accounts, receivables and inventory. And we continue to have a positive trend on reducing inventory this year. And we expect to beat our target that we've communicated of 200 million SEC inventory reduction for the year. On the right hand side, you can see the year to date numbers as well. And so far, the capex this year, just to point out the capex below cash flow from operations is 183 million so far this year, which means when you sum those up, a free cash flow from the operations is 1.741 billion is what we've generated from the operations this year after capex. And all this has, of course, a strong deleveraging effect. on our balance sheet. So the debt to EBITDA ratio at the end of quarter three, 2024 has been further reduced and is now down to 0.5 times, debt is 0.5 times the last 12 months EBITDA. So with that, I will hand back to Matthias. Thank you, Toby.