Thule Group AB (publ)

Good morning, all, and thank you for joining us for the Thought Group Interim Report Q2. My name is Carly, and I'll be the coordinator for today's call. If you'd like to register a question during the call, you can do so by pressing star-folded by 1 on your telephone keypad, and to remove yourself from the line of questioning, it will be star-folded by 2. At that time, it's the President and CEO, Matthias Ankerberg. The floor is yours.

Thank you very much. Welcome, everybody, to today's call. I'm also, as usual, joined by Toby Lawton, our CFO. We will talk to the presentation and it is later on available on our IR website as always. So starting off with the summary on page two, this quarter is a quarter where we're growing, even though the market is still tough, growing a bit more than in Q1 and total sales in reported currency amounted to 3.4 billion. That's 16% more than last year, excluding the currency effects. We continue to see a weak market, both on the retailer and the consumer side, and particularly so in North America. On a positive note, it's not getting worse, but it is still tough, and we'll get back to that. Organic growth was a small plus, 1.5%. Europe is out four, and North America is down three, which we are, of course, not happy about, but it's a Big improvement versus the development in the first quarter, which we'll speak more about later. Quite significant currency effects in the quarter of almost 6% negative takes reported growth in Swedish kronor to 10%. And it's very clear in the quarter and also in the previous quarter that the growth is coming from new products and new product categories, including the acquired QuadLock performance mount business, which continues to do well. It is, I guess, a fun fact, but it is the biggest quarter in terms of sales in Thule history and about 100 million bigger, I think, than the peak quarter during the pandemic. Gross margin increased close to two percentage points, driven by Quadlock, which has a financial profile with a higher gross margin and higher share of SG&A. EBIT or adjusted EBIT margin was down two percentage points. It costs a bit more to drive growth in a tough market. And as we have said going into the year and also in Q1, we have more product launches ahead of this high season that is in H1 this year compared to last year. So the product development costs are higher in the first half year compared to last year. So the operating profit or adjusted EBIT is in line with last year, excluding the restructuring costs for the actions we're taking in North America, the actions we announced the last quarter. Cash flow for operations was very good at almost 800 million. Just as a reminder, the working capital pattern that has been a bit different the last few years are now in line with historical seasonal pattern, and we have an inventory reduction target of continuing to reduce inventory on the back of the 1.2 billion we've done last two years of another 200 million this year, which is on track. A couple of highlights. We are very happy to have received further strong recognition for good product design. In March, we received seven F-Design awards. And now in this quarter, we have received 10 new Red Dot awards, which is, of course, a lot. Big credits to our team. We've also won the ADAC car seat test, Europe's most important consumer test for car seats. We won that during the autumn with our first product, and we won it again now during spring with our second product. And lastly, the changes we have made in North America are starting to pay off. We will get back to it in a little bit. Turning the page and zooming out, We see that the profitable growth trend is continuing. Thule has been a public company since 2014, and we have a good solid development of profitable growth for many years and continues also this year. We can also note that on a rolling 12 basis, net sales is now above 10 billion. And again, EBIT is a bit weighed by product development costs earlier in the year this year. Still, the total amount is about last year. We're a product company and we report four product categories. And as usual, let's go through them all to give you some flavor of what's going on in the business. The headline across all is that the new TULU products and categories are the factors driving the growth also in this quarter. Starting with sport and cargo carriers, which is... our biggest product category for sure. We've had a better Q2 than a Q1 with the net sales, which, and when I say net sales here, we refer to organic growth of 3% in the quarter, takes the year-to-date number to plus, plus one. Several good launches are really adding growth. So we've updated our best-selling bike carrier, Thule Easy Fold 3 in Q1. That's clear, clear support for the growth. We've launched a few North America specific bike carriers, which are really doing well. We've had a June launch of our new lightweight, more mid-priced compact bike carrier, Tula Outpace, which has started really well. And in general, we have several rear of car cargo products that are also adding really, really nice growth. So several successful launches. Having said that, it is a tough market, particularly so in North America, continues to be weak as we've exited Q1, sort of Q2 continues. Consumers are cautious, but also on top of that, retailers are cautious to build inventory. So growth in total continues in sporting cargo carriers in Europe, almost there in North America in the quarter, but a big improvement versus last quarter's trend. Second category, RV products. We have the second quarter in a row now with growth despite the weak market. Had 4% growth, organic growth in the quarter. Takes the year to date to three. The industry is going through a weaker period and we have our sales pattern reflect that. We continue to decline in sales to the OE channel or the RV manufacturers, but that's offset by good growth in the aftermarket channel, that is to dealers. And we should also point out that also in the RV business, we have invested in new products and it is very clear that the new products, which also received some nice design awards, are adding to the growth number in the quarter, now that the season is here. On page five, we'll cover the remaining two product categories. And active with kids and dogs is a mixed picture. In total, the category grew by 1%, which is a bit better than Q1, taking the year-to-date to minus two. We have two new product categories in this area, and they are both adding to growth for sure. The first is dog transportation, which was launched early last year. A really nice start last year. Actually, the best start of any new product category. Continues very strong also this year with the premium dog crate Tula Alex and the dog trailer Tula Bexy. And we just launched the product that you see on the picture to the right, Tula Cappy, which is a crash-tested dog harness for dogs now in June, which also had a very early, of course, but a good start. So very pleased with the development in dog transportation products. And also car seats, child car seats for sure add value. Of course, boosted a bit by the ADAC test, which we're pleased about. And another new product coming also here in the second half of the year. So two good growth drivers there. However, offsetting that is a decline in sort of bike-related products in this active with kids and dog area. Very cautious retailers to take on inventory and some of them, also struggled financially, and we see that pattern from Q1 continues now in Q2. The highlight in this product family is that we continue to see very nice, good sales momentum on Tudor.com, but on the retailer side, it is more challenging. So a total of those two different sort of aspects added that to plus 1%. Bags and mounts is also a mixed picture, where in total the category grows a lot. But that's because we include the acquired Quadlock business. Organic net sales, which is the bags business, declined by 21%. So Quadlock, if we start there, is two thirds of this product category bags and mounts now. Continues to do really well. increased sales by more than 15% organically, continue to be fueled by good products and good market expansion. And we're very happy to see that the business continues to do really well. The bag side is the opposite side of well, a big decline and a couple of clear reasons for why. First of all, we should just remind everybody that we have had a declining part of this category for a long time, which we refer to as legacy products that are being phased out over time. And then secondly, an important factor here is that North America represents a very large share of this category. It's for many purposes, mainly North American business where the market has been very weak. And a lot of this is sourced from Asia and Southeast Asia in our case and Retailers have, particularly related to the tariffs, also been very cautious to take on inventory in this category. Same positive note as with Active with Kids and Dogs, that we do continue to see good growth of bags and luggage. Tullo branded products on Tullo.com, we reach our own consumers and they are happy to receive our products and we see sales growth there, but a very challenging retail environment in bags. So on the note of North America on page six, we have for sure been impacted by the weak North American market in Q1, particularly following the tariff announcements made. And we had a minus 13% organic sales development in Q1. And as you may remember, if you follow us, we talked a quarter ago that we made significant changes to North America. We have a new dedicated North American sales organization in place that is now based in our regional head office in Connecticut co-located with one of the two factories that we have in the US and we have closed a satellite office that came with an acquisition many years ago which and that decision has now been accelerated and Toby will cover that later but it relates to the one-off costs so that new organization dedicated to North America on the sales and marketing side we've also focused our growth investments on we think are the most attractive pockets we um We are the market leader in bike carriers, but we have lots more to do there. And then we have a new focus on pickup trucks or renewed focus on pickup trucks. And then thirdly, we have done price increases as of June 1 to offset the impact of the tariffs. And it's nice to see that as we wrap up Q2 that the changes are paying off. It is still a weak market, although not getting worse. And we have a clear improvement in the sales trend with Minus 13 in Q1, now being minus 3. Of course, we're not happy until it's a plus, but it's good to see that things are moving in the right direction. And it's even better to note that the difference is really driven by the new, strong, performing North American bike carriers, which actually have been in very high demand. Even if the market is tough, we've been selling more than we can produce, which is a nice problem to have in this situation. We continue, of course, with this work and the bike carrier work, but also the new truck bed rack tool Xscape, which we believe is a really strong product, very robust and easy and quick to both install and adjust. We launch here towards the winter at the end of Q4. And also note that both these products are also produced in the US. This could be noteworthy given the tariff discussions. We have... We're really proud of the team and of the whole Thule organization that we've also been winning further recognition for our product development and design. So page seven, just outlining, we won the ADAC, the Europe's most recognized car seat consumer test again. And it's a product called Thule Elm, rearward facing for children, small children between six months and four years old that won the test now in May. And digging into the details and the test results, particularly, I would say, we're particularly happy to see that we are recognized as the number one brand to eliminate misuse, which was a key part of our car seat launch, that a lot of car seats are safe. But, of course, we could take it to the level in terms of both safety and convenience. But we also know that a lot of car seats are not installed correctly. And we wanted to deliver a product where it's easy to do. a good installation that is safe and we get good results from that design. So that's really nice to see. Winning with the first product and with the second product. And we've also been awarded more design awards. We had seven IF design awards received in March this year. And now we have received 10 design awards from Red Dot, which is the second of the two big international design award organizations. Very pleased to see that. call out that we have or note that we this year have been receiving awards also for north american specific bike carriers but also for in this list two rv products to the villa swing into the villa track that also help our performance within the rv business of course turning to page nine we are of course focused on growth for the short and the long term But another one of our key priorities is to drive further efficiency within our supply chain. You may remember we have been very focused on inventory levels and taking 1.2 billion SEK out the last two years. And we are now taking the next step to extend and automate our warehouse facility in Poland, in Huta in Poland. It is a fully automated warehouse, or it will be a fully automated warehouse with triple the pallet capacity of today. And that means we can eliminate costs for two external warehouses and actually also reduce inventory levels. We reduce double handling and we can optimize logistics better. And of course, also lower personnel costs. And we expect this project to be or this new warehouse to be up and running by 2027. And I will give the word to Toby to go through some of the more investment details of the project.

Thank you, Mattias. And good morning, everybody. Just to give a few of the financials on the Huta project, we expect a capex of approximately 450 million sec, and that will be phased over the next three years, as you see below, 30% in 2025, 60% in 2026, and 10% in 2027. The cash savings from the project are approximately 100 million sec per year, which we expect to have full effect first from 2028. But there will also be a one-time positive effect on inventory of approximately 80 million SEC, and that will come successfully during the first year of operation of the new facility. Then we expect some depreciation, of course, annual depreciation of approximately 25 million SEC, which then results in an EBIT impact of 75 million SEC per year, again with full effect first from 2028. And just to mention, this is uh, uh, an important project for us, but it's part, it's part of the Tula investment program that we have going on the normal investment program. And we expect that to remain at approximately, uh, 2.5 to 3% of revenue over time. So, um, so we expect to remain at that, at that level, excluding, uh, leasing CapEx. All right. And with that, I can flick on to the next slide, slide 10. Um, and, uh, There's a lot of numbers here, but just to orientate, the left-hand side here you see is a recap of 2024. In the middle, you see 2025 by quarter, and on the right-hand side, you see a year-to-date comparison of the figures for 2025 and 2024. And if I start with the revenue growth, as Matthias has mentioned, we do have – Revenue growth, obviously this quarter in a challenging market, but revenue growth in total is 10% from 3.1 billion last year to 3.4 billion this year. That's a 10% reported revenue growth. We have organic growth of 1.5%. Then QuadLock contributes with over 14%. And then we have a negative impact this quarter from FX, which Matthias has mentioned, which is obviously due to the stronger Swedish crown, which we see this quarter. The growth is driven by new products and categories, as Matthias has mentioned, and also to mention here again that the last 12-month revenue has increased and is now 10.1 billion when you take the last four quarters together. When it comes to the gross margin, we had a Q2 gross margin of 46.3%. this is approximately two percentage points up versus last year, which was 44.4. So two percentage points up approximately, or 1.9 percentages up versus last year. It's also 1.5% better than the first quarter gross margin. And just to mention here that the biggest factor versus last year is quad lock, but versus the first quarter, we are returning to the normal pattern where we We still have the highest gross margin in our biggest quarter, which is the second quarter, but we expect to see a more even gross margin across the year, across the four quarters. If I come down to the cost side, selling expenses have been impacted mainly by the acquisition of Quadlock. And here it's important to remember that while Quadlock has a positive impact on gross margin because it has a higher gross margin, It also has a higher level of selling expenses. So it does impact the selling expenses. And the other factor in selling expenses is the earlier phasing of the product launches this year ahead of the high season. Then we also have administration expenses where we also have some impact from the acquisition of Cordlock, of course. Coming down to the adjusted EBIT, We had an adjusted EBIT of 734 million this quarter, and that is adjusted to remove the impact from the one-off impact from restructuring costs in North America, which was 31 million SEC taken this quarter. And they relate to the closure of our site in Longmont, Colorado. So if you look at the adjusted EBIT margin, Then the adjusted EBIT margin is 21.6% in quarter two. We had 23.6% in quarter two last year. So this is lower than the adjusted EBIT margin last year. And the main impact here is from the development cost related to the phasing of product launches, which we mentioned earlier. So that's the main impact on the EBIT margin. But it's important to remember it's the same new product which we're launching, which are also driving the top line growth. So they come hand in hand. Then further down the P&L, we have an interest expense in quarter two of 39 million sec. We have a tax charge of just over 150 million sec, which is an effective tax rate of 23%. And then, yeah, net profit in the quarter, 512 million sec. Good. And if I move to the next slide, slide 11, here we have the cash flow in the same same format so i won't repeat that um and you can see cash flow from operations in the second quarter was 744 million sec um working capital contributed here with 156 million sec which is uh part of our seasonal pattern which matthias mentioned earlier that we we build up working capital some quarters and we release some quarters and we release uh some working capital in quarter two but it's a It's a swing between different lines within working capital. So this quarter, we had a good reduction in inventories of 303 million, which is normal for us due to the seasonality, because this is the high sales quarter. So we sell down inventory. And we're still very much on track towards our annual target for the full year to reduce inventory by 200 million SEC. Receivables goes the other way, however. We increased receivables because this is a high sales quarter. Again, it's the same effect. And we increased receivables by 282 million in the quarter, but overall working capital reduced by 156 million. Then we had a capex in the quarter of 58 million SEC. Year to date, we are on 98 million SEC for the first half year. That level is expected to be a bit higher in the second year as we start to have some of the Huta CapEx in H2, but still within our expected investment program. And then we had a dividend payment also in the quarter of 448 million. So all in all, that means we had a, if I move to the next slide, slide 12, we're very focused on our cashflow. We're very focused on managing our leverage. and the net debt came down slightly but net debt and leverage are basically on a similar level than they were in in q1 um going forward i think it's important to be aware we we do expect this to come down in q3 both net debt and leverage ratio net debt to ebitda and that's due to the fact that also due to the seasonal patterns but that we we have a strong cash flow in quarter three uh And we also have no dividend payment in quarter three. So that means that we expect to reduce our net debt and our leverage in quarter three. Okay. And with that, I hand back to Matthias.

Thank you, Toby. Turning to a few forward-looking comments to wrap up the presentation part, doing it on page 13. As far as focus, we continue to drive the long-term growth strategy we have in place. And we're doing that in a tough market. Having said that, we are, we think, quite well positioned in a tough market. Yes, North America is tough. Yes, consumers and retailers are cautious across the world. And we do expect that to continue for the coming period. But we are global market leaders in the most important product categories worldwide. We sell premium products to consumers that are enthusiasts and have the ability to pay for news and innovations. I think we have proven over time again and again that we are world leading when it comes to developing new products and have innovation capabilities. We have a manufacturing footprint both in Europe and the USA and we have financially strong that we can do long term investments. We're also well positioned in the aspect that we can impact quite a lot of our own destiny we know that investments in product innovation pays off both in the short and long term q2 is a very good example of that we also have opportunities to increase our efficiency and take out costs and the extension and automation of the warehouse in poland is a very good example of that so things we can do within our own control The four priorities that we continue to drive are product development, where we have a really high pace this year, more front-loaded compact next year, and increased focus on the attractive pockets we have identified in North America. That's making a difference. We are scaling up new product categories, both the ones we've launched organically, dog transportation and child car seats, and the acquired performance phone launch business. We're working on... being more visible to the consumer. And we can see how the DTC channel continues to outperform all other channels in the quarter again. And on the theme of supply chain efficiency, we are working on continuing to lower inventory level to free up cash. And also, as mentioned earlier, now a automation project of the Polish warehouse. So clear priorities with a few new action points, but the four main priorities continue. We are in the middle of the high season. It is a very big product launch year compared to last year. We're more front loaded and the high launch pace continues now in 2025. We have three themes this year. We are upgrading several of our best sellers. We are innovating or launching innovations in our core sport and cargo carrier category. The few launched and a few to come. And we're also scaling up our newest product categories. And let me just wrap up by showing you a few examples of what's coming very soon. On page 15, we have a short view of Tule Palm, which is the newest edition coming in a couple of months and adding to the car seat category. It's a high-back booster seat for the bigger children. which of course is safe and well to the designed and has received positive reception so far from the retailer environment. So really looking forward to see that coming to consumers hands. We are soon in, in this quarter in Q3 building out our leading duffel bag collection to the chasm with more types of products and new colors and also more accessories. And that's been a growth driver for us and look forward to see more of that. And then with a, Change of mood from summer to winter. Hope everybody gets a good summer vacation first. But when it comes to booking that ski vacation, keep Tula Arcos XL in mind, which is a good cargo solution behind the car, which is now wider and extended and would enable most people to transport their skis also behind the car for easier access and more convenience. So just an example of a few products that are to come during the second half year of 2025. That concludes the presentation part. We'll get back to summer mode and we'll get back to the operator to manage questions.

Thank you very much. We are now ready to open the lines for Q&A. If you'd like to ask a question, please press star followed by one on your telephone keypad now. And if you'd like to remove the line of questioning, it will be star followed by two. As a reminder to raise a question, it will be star followed by one. Our first question comes from Daniel Schmidt of Dansk Bank. Daniel, your line is now open.

Yes, good morning, Mattias and Tove, I hope you can hear me. Just a couple of questions, maybe starting with the US, which of course has been in focus for a number of reasons. Could you say anything starting with the reception of the price increases that you conducted by the first of June? I know it's quite difficult to sort of to really figure out what was pre-buy effects and so on in May, maybe, and what's going to happen in what happened in June. And what do you see now, six weeks after the price increases and, and maybe tie that together with sort of your belief of the underlying demand pattern in the U S that you've experienced so far in the past couple of months.

Hi, Daniel, hear you loud and clear. Uh, Yes, and just a reminder for everybody, we increased prices in North America with about 10% as of June 1 to offset the impacts from tariffs and secondary effects, I would say, of a lot of other things. Now, you're right in the sort of... In the directions you call out, Daniel, there was a bit of pre... We announced this quite well ahead of time to our retail partners, so there was a bit of pre-buy in May to get the lower prices, obviously, and then a little bit softer June, but not too dramatic, I would say, in either direction. I personally believe that a lot of retailers are focused on inventory levels right now, and it's not really worth it or worth the risk for many to... to take in a lot of inventory ahead of time. And then we operate, as you know, a very retail-like supply chain model. So we can also deliver very short notice in June. But there's a bit of pre-buy that helped me and sort of hurt June. And I guess it's a little early to see what happened in July, but no drama, I would say. The other point I think that's worth calling out related to this topic is that we've seen Pretty much, I would say, every single player we keep an eye on also increase prices around this timing. Some a bit earlier than us, some in June and some mid of June and some now in the sort of follow up price increases also in July. So I think the entire market is moving up in price in most of the categories that we are in. Volumes hurt, of course, when the prices go up quite a bit, but the sales continue. price helps just pure mathematics i think the underlying demand um is is tough and weak i mean there was a bit of a sort of full stop experience there among the tariffs in during q1 and then you empt sort of left q1 with a lower market but stable and that sort of continued i'd say look throughout the second quarter and that continues in q3 as well news is really what's working so i guess that's a couple of uh observations around your question, Daniel, and feel free to add follow-up questions if there's something to drill more into.

Yeah, there's a lot of moving parts, of course. And would you say that the exit rate is better than the entry rate in the U.S. for your sake in the quarter?

I'd say it's about the same. I mean, the thing that really moved the needle for us in Q2, I mean, we had a minus 13 percent organic in North American Q1 and minus three in Q2. But the thing that's moved the needle for us is the new product and the new North American bike carriers specifically and where we have really good reception. So it's more tied to our performance is more tied to the launches of that. And, you know, the big retailers getting the bigger orders out to all the stores, et cetera, of that.

so I don't think actually I could call out the big difference in underlying trends throughout the quarter except our own actions which are the most significant parts okay and you actually also speaking about growth you actually managed to grow RV again as you did in Q1 even more so in Q2 despite the OE market being down quite a lot still in Q2 and At the same time, it was really in Q3 last year you started to see the big drop in OE, and we also have one of the biggest players being out a couple of weeks ago saying that they will increase production because they think dealer inventories are now in balance. Should we start to see the OE side of RV performing better for you guys now as we get into Q3 with easier comms and these comments in mind?

Hi, Daniel. Good morning. Toby here. But I can comment on that one. But we have seen in Q1 and Q2, the OE market is down a lot. And we've been down a lot in that sector as well. We've just been compensated by a really good performance in the aftermarket. And we do see generally when it comes to consumer side that the sales are decent. It's pretty stable versus prior years. So consumers are still interested in buying RVs from the dealers and inventory is coming down, as you say, but I mean, it seems to be a very mixed picture across different manufacturers. And I would say in general, we've seen, I think the trend is that in Q3, which is also the kind of where they take vacation stops, but there's going to be more reductions in production capacity than expected in Q3. So we expect Q3 to be impacted more than we more than we had previously expected. It's gone on a bit longer, this effect. And it remains to be seen how much it carries on after Q3. But I think it's getting better for some manufacturers, but it's not getting better for others. So it's still going to be tough for another quarter, at least.

I guess the German manufacturers are going to be more impacted than you maybe earlier expected. Yes. if I read between the lines. But again, you do have a lower base to compare with on the OE side at least. Yeah, I mean, it did start during Q3 last year. As it dropped quite a lot in Q3, yeah.

Yeah, exactly.

And just maybe then moving on to costs and margins before I leave the floor. You did, of course, reiterate that you were quite front-loaded on PD spending. You did provide some information in Q1 saying that that was the difference versus the margin last year. Is that true for Q2 as well? And you stick to your guidance that you will and should be around 7% of sales for the full year?

Yeah. I mean, I think you answered the question yourself more or less, Daniel. But yes, I mean, the biggest factor in the margin... drop versus prior year and if you take adjusted EBIT margin we are 21.6 percent this year we were 23.6 percent last year so the margin is lower this quarter versus last year and the biggest factor there is the phasing of development spent towards the first half year and we do expect development expense for the full year to be approximately seven percent so yeah all right

And good. And it is finally on the gross margin, which did pick up quite a bit. And you're right, that's basically due to quad lock. Is there anything else that you want to mention that had an impact? Because we did talk about freight cost enrollment errors in the previous quarters. Are they now basically unchanged on a year-over-year basis? Or what's your view?

Yeah, I mean, you're correct. So the biggest, the impact that increased the gross margin versus prior year is the quad lock impact. So that's true. And I think I've talked a bit about the pattern of gross margin through the year where we expect it to be a bit more steady throughout the year, basically, that we, you know, we had an uplift in Q1 2020. this year versus last year, due to the fact, as you mentioned, due to product mix and price. But here in Q2, it's more level. We have a 1.5% increase between Q1 and Q2, which is more in line with the normal pattern of gross margin. So year to date, we do have a small improvement, but basically underlying gross margins are pretty much flat with last year.

Yeah, okay. And this finally, maybe on those investments made in Poland, with 75 million in savings on EBITDA for effect 28. Is that going to be back end loaded? Or is there any impact on 26 and 27 in terms of savings?

Yeah, there will be, we expect it to start up in 2027. So we expect some effect in 2027. But the first full year effect will be 2028.

Thank you. Thank you so much.

Thank you very much. Our next question comes from Frederick Iverson of ABG. Frederick, the line is not open.

Thank you. Good morning, team. Can I come back to Daniel's question on the EBIT margin? I go down a couple of percentage points here. versus last year in the first half of the year, if we exclude Quadlock. And I guess the key driver, obviously, is the product development costs. But if you were to call out any other drivers of the somewhat lower margin, which ones would that be, please?

The main driver is the product development costs, Frederik. So that's the main driver of that EBIT margin impact.

I think to add to it, I think last in Q1, we said, I think the full gap was explained by product development facing, and now it's the majority again in Q2. So if we do exclude the Quadlock impacts you talked about, the clear big reason is the product development cost, I mean, full in Q1 and most in Q2 as well.

And with the majority being more than two-thirds, or how should we read that?

Something around there, I think, yeah.

Okay, good. Thanks. And you might have already answered this question, but the underlying gross margin sounds flat this year. Can you just confirm that again? Sorry, I sort of missed the answer on that question before.

Yeah, no. So in Q2, the underlying gross margin is flat. The impact is from the QuadLock acquisition in Q2.

Okay, good. That was actually all my questions. So thank you and enjoy the summer.

Thanks, Frederik. Thank you very much. As a reminder, to raise a question, we'll be staffed by one. Our next question comes from Gustav Heges from SEB. Gustav, your line is not open.

Thank you. Good morning, guys. Thanks for taking my question. I have a question on OPEX, the OPEX build in the quarter. I appreciate your comments on R&D and phasing, but looking at FTEs, it builds a bit. Quadlock, I assume Quadlock has say 110 FTEs, but please correct me if that's not an accurate number. But assuming that 110 FTEs to Quadlock, then the underlying FTE base is up, say, 10% year over year. Inventory was down in the quarter, 1.5% organic growth. I assume no volume growth, really. So curious to understand sort of the breakup here between perhaps if you could elaborate a bit on the breakup between Sweden and other geographies in terms of FT build. And yeah, that would help. Thanks.

Yeah, I could I can. So you're right. Quadlock is approximately 110 Gustav. The remaining part is really seasonal workers in factories. So it's not Sweden. We don't have much seasonal work in Sweden. It's largely in Poland and US where we have seasonal work. And we have, you know, being strong in bike carriers with products we obviously produce ourselves and which are quite intensive on seasonal work. So we have seen we have a higher level of activity in our factories basically in Q2 than we had Q2 last year.

Okay, would you mind sharing the number of seasonal workers who used to do that, but I think you discontinued that in Q3 last year?

I think we don't separate out employees by different categories, Christoph, but the increase is driven by both cordlock and seasonal workers.

Okay, and the number of FDs in Sweden versus a year ago, is that up or down?

Yeah, I don't have the figure to... to give you Gustav, but it's stable. I think it's not a big change.

Okay. Yeah, those were my questions.

Thanks, Harry. Yeah, thanks. Thank you very much. Our next question comes from Adela Dashian from Jefferies. Adela, your line is now open.

Thank you. Good morning, gentlemen. Just a few questions. from me, firstly on this year's heavy product launch year. I guess, how should we view this going forward? Has 2025 and I guess also 2024 been more of like a hold forward of some product launches? And should we expect next year to be a bit more moderated? Or do you see opportunities to continue to scale the new categories in ways where growth could continue to be supported by the new product launches next year?

Hi, Dela. Yes, happy to answer that question. So we work with long-term product portfolio plans for all our categories, sort of three to five-year outlooks. And it's been really intense in the launch calendar, both in 24 and 25. Last year, mainly because we added two new product categories. And this year, because we're doing more in our sort of core categories, if you like. We make decisions sort of every after summertime, early autumn, about what to launch for next year. Again, we have long-term plans, but we do have some flexibility to pull some things forward or shift some things out, depending on what we find is attractive or not. So that's an important exercise to be done during the third quarter. I think the thing I want to make sure I mention is, We have purposely and actively ran a pretty heavy product launch calendar this year because we see that's what's resonating with the market and that's what's driving growth. Yes, it costs a bit more, particularly because we take a lot of our product development expenses as SG&A, including tooling costs and things like that. But it adds sales, gross margin, and it adds, of course, positive contribution, although maybe not in percent in the same quarter. And it over time makes us a stronger player with the partners and gives us a bigger footprint when the market returns. So we'll make those decisions for next year during Q3 and we will update you before the year is over on our launch plans for next year. But it's active decisions that we are making.

So if that's the case, I guess, would it be fair to say that last year around this time you actively decided to push ahead with more product launches than you would have in 2025 in order to combat the weaker market environment?

Yes. During Q3 last year, we had those conversations in our organization, and that's when we made exactly those decisions. Correct.

Okay. Got it. All right. If we to North America then, is there any way for you to be a bit more precise on the growth number here, the negative organic growth, like how much did these new product launches support, what was driven by the direct-to-consumer platform, any type of, you know, I understand you can't be overly specific, but yeah, any type of commentary here would be super helpful.

Yeah, sure. No, we'll add what we can. No problem. I think, you know, overall, again, sounding like a parrot, a tough market, clearly visible in some of the high tariff exposed categories like bags, for example, where retailers are super cautious, right? That's another color there. I think two other comments, maybe we see that, you know, The consumers are, yes, cautious, but retailers are also very cautious on inventory build. And we continue to see our DTC business in the US, Tudor.com, growing and clearly outperforming the total. So I think that's a sign that it's not just consumers. It's also a bit of retail behavior and I guess a bit credit to our DTC team as well. And I think a second caller, which may be a more important one I can throw in, is pretty much the full difference between doing a minus 13 in Q1 organic sales in North America and a minus 3 in Q2 is related to new products and particularly new bike carriers for North America. And you never really know before you launch. You believe you have some really strong products coming, but a couple of them have actually been selling more than we can produce and have to add shifts in our production capacity. So the new products are really sort of what's helping the trend improve quarter on quarter. And of course, also helping the total.

Okay, that's actually good color. Thank you for that. And then just lastly, on the inventory targets or the inventory reduction targets that you've had for this year, are you still progressing as planned on that? No changes?

Yeah, hi, Adela. Toby here. Yeah, absolutely. So we have the target of 200 million. That's on top of 1.2 billion that we released over the last two years as well. So we expect another 200 million inventory reduction this year. Yeah, we're working hard towards that and we're on track.

Great. That's all from me. Thank you.

Thank you very much. Our next question comes from Carl Derenberg of ITV. DMV college car. Your line is not open.

Thank you. Now, maybe you can hear me better now. Um, warning guys. Yeah. I just wanted to follow up again on, on, uh, on quad lock. Um, And maybe specifically on the US, which is obviously quite an important market for that entity as well. And just if you could remind us a little bit on the pricing dynamics and so forth. And maybe, you know, if you could share a little bit the development during the quarter as well. I know you haven't been as pronounced on the pricing adjustments relative, let's say, all two, but... Anything that has changed there in recent weeks from the back of the tariffs and so forth, given the DTC model and sourcing and so forth? Or has the quarter been fairly undramatic when we look at the growth that you reported here in Q2 for Quadlock specifically in the US?

Hi, Carl. I think you're breaking up a little bit at the end, but I think I got your question. So I'll answer and then just follow up if there's anything else. So on Quadlock, of course, Quadlock exposed to many of the same kind of macro factors that, I guess, not just Thule, but many companies are. So, of course, it's a little bit of a headwind in the US, still delivering good growth. Price increases have been made also in the Quadlock business. It is a little bit of a different business model, as you know, because it's sort of lower ticket items and it's very heavy on D2C, 75%, and can make much more frequent changes. So it's not as sort of in their As you called old Thule business, it was sort of more general priceless as of June 1, whereas in Quadlock, we make more continuous changes. It's also maybe worth to call out that gross margin is clearly higher in the Quadlock business, as you know. So you can be more nuanced and optimizing pricing over time to carve it out. It doesn't really impact immediately the gross margin to the same extent. So to summarize, yes, same market forces and yes, price increases in QuadLock executed in Q2 as well.

Yeah, fair enough. And then coming back to the gross margin again, and apologies if this question was already asked, but has there been any headwinds in the gross margin here in Q2 or let's say the year-to-date development on the back of the underutilization? I guess you're having a little bit. lower temps workers now as you are still reducing inventories or or is that effect now fairly marginal as the big chunk was taken you know last year uh is the effect very limited now um i can try to answer this but i mean i think i mean there are definitely headwinds there's cost inflation when it comes to material cost and and of course

there's some salary increases which we're offsetting and we're driving efficiency gains to offset as much of that as possible. But we're not offsetting it completely on the cost side. We do have to offset some through price increases, which we've done as well. So, I mean, it's definitely, there definitely are cost headwinds. And I mean, I would throw into that, you mentioned a bit the The kind of seasonality we are, you know, we're producing a lot of the bike carriers ourselves. And in the US in particular, you know, we've been running out of capacity. So we've been trying to increase capacity a lot. And there we put a lot more focus on more people into the factory to try and drive up the production levels and increase capacity quickly to meet the demand. So there's a kind of combination of many effects. But underlying, you know, it's flat versus last year. Yeah.

And then just finally, a little bit more of a technical question, but just the adjustment that you're taking here in Q2 of roughly 30 million, is that, you know, in the Longmont facility, is that the total that is planned to be taken or is there any further one-offs here that's expected in Q3, Q4?

No, that's the total. So it's expected to cost 31 million. Yeah.

Okay, thank you very much.

That's cool. Thank you very much. Our next question, from Nordia. Your line is now open.

Thank you. I have three questions. Maybe coming back to the US and your comment that you've seen quite good demand for your bike products and that you were running production somewhat lower than the underlying demand. And can you tell us if you now have your ramp tapped accordingly? I mean, is your production now running and meeting your demand expectations in the US?

Hi, Mathias here. Yes, by and large, we have. And it's a positive problem to have in this market when you have more demand and supply. But there is one product where we still would like to do a little bit faster production pace. But by and large, we are now meeting the demand as we are in mid-July here.

Perfect. Thank you. Maybe follow up on that. Do you feel that you lost any sales in Q2 specifically because of that issues?

Well, I think there's two ways to answer that question. First of all, could we have sold more in Q2 if we had more product capacity? Yes, that is true. So from that perspective, yes, we did lose sales. But I think from a sort of total to the group perspective, the answer is no, because these were new products. And we've been a lot focused on bringing in innovative products to enter new niches and new adjacent segments in North America. And this is what we've been successful with. So It's not lost versus last year, but it's a somewhat lost opportunity.

Understood. Thank you. And then just looking at your organic growth profile, you returned to growth in Q2 again now. And if we assume that we don't see much deterioration in the underlying markets, what are your expectations for your growth in the coming quarters? Just looking at your product launches, price increases and the trends that you see during the selling season right now?

No, but as you know, we don't give sort of guidance or clear forecast like that. But I think it's, of course, positive that what we see that we do, our own actions, is giving good results. We have been more front loaded on launches this year, but we hope that they will carry also during, of course, the rest of the high season and into the autumn. And then we have a couple of more things coming. So We are very confident that Thule will be better and better as the year progresses. And that's, of course, a long-term thinking. And we have more things that will be more positive for growth. And then it is an uncertain market out there. And new tariff announcements slash potential announcements, I guess, happening on a daily basis almost, which impacts purchase decisions from some customers and also some supply chain elements sometimes. We are very, of course, humble about things, but very confident that we'll get better and we have more good products coming. But if the market is exactly the same or not, then we will see. But we remain focused on investing to grow and hope that that pays off and the market is at least not getting worse.

Thank you. Then my last question is on the bag business. Quite heavy decline in the quarter, more than 20% organically. Can you just remind us about the size of the legacy business right now for you and how fast do you expect that business to be phased out and also what kind of impact on profitability there could be if that business disappears?

Yeah, so I think you're very right on the dynamics and let's make sure everybody on the call gets this. I think what's now called bags and mounts, first of all, mounts or cold lock is two thirds of that. So that's one third sort of of the Previously, PaxPax is a luggage business, and out of that, around 25%, 30% or so is legacy business. The margin profile of that business is actually quite good. It's in line with sort of the bags category in general. Otherwise, it would, of course, be an easy decision to just delete it. But it is in product categories, which are sort of just facing macro headwinds generally or really tough marketplaces. Yeah. We're not discontinuing the products because they sell and we make money on them. And there is a small niche even for CD wallets these days, believe it or not. And the camera bags and other things. But we're not investing and building it out. So it will eventually come to a decision, of course, when it's time to stop it. But we are not there this year and probably not next year either.

Thank you.

Thank you very much. Our next question comes from Mads Liss of Kepler. Mads, your line is not open.

Yeah, thank you. A couple of questions. Well, Europe there, could you give some sort of flavor regarding different geographical areas, countries in Europe, how you propose the development?

Yeah, I can take that, Mads, but... think we give a bit of um a bit of color in our in our report also when we talk about the regional mix hang on i'm just finding the um finding the page uh yeah so we so yeah so so um yeah so so i mean generally across europe we see it's pretty even i would say generally pretty even growth across across uh most most markets in europe um and we have our kind of strongholds in kind of Nordic and Dak areas. I would say we're stronger when it comes to some of the juvenile products in some markets like Benelux and Nordics, where we're getting traction quicker in those areas as well, which are going well, but generally pretty even performance.

I would add to that. I agree fully with Tobias' comments. It's pretty even. I think the difference we see between the countries are, of course, there's some macro situations. But for us, it's more around product mix, where we are stronger and weaker, for example, in different parts of Europe. For example, where RV industry is more dominant, of course, we had a pretty good market in RV. That helps. Big picture, pretty even across Europe.

Thanks, very good.

And well, coming back to Quadlock, I guess, if I remember right, you have sort of indicated that the growth had been sort of 20% plus quarter over quarter for Quadlock. Have that trend continued in the second quarter? 20.

I think when we did the acquisition, we shared some more information and also Commentary on our website, if you like. The category for the performance phone mounts have been growing around 10% to 12% historically. And we believe it should continue to grow around 10% going forward. And Quadlock has been beating that as the market leader. A lot of it thanks to product innovation and expansion of the product portfolio. So in Q1, the growth was over 20% for Quadlock Organic. And now in Q2, the growth was a bit more than 15%.

You mentioned the new car seats for older children. How much does that add to the total market opportunity for car seats?

Well, it's a significant piece, but it's not as big as the segments already out. So this is the smaller one, which is one part of why it comes a bit later. But it's good also. It's a good one, but it's also good from a, you know, product offering kind of perspective because kids grow, right? So we start with launching products for the infants and then the toddlers. And now for the little bit bigger products, you can... grow with the Thule Carseat family. But it's the smaller one of the three.

And are you fully loaded there now? Or are there more to be in the Schindler's area?

So now we have an offer. When this product is out, which is not yet, but it will be during the month, then we will have the full offer between infant, toddler and and young children, so that feels really great for Europe. But of course, over time, we are an innovation and always pushing the boundaries, so you will see new car seat products coming from Thule in the near future as well.

Sure, I expect that. Dan, I guess I had a question. Well, you have this investment program in a new warehouse in Poland. What will happen with the capacity there? Is it sort of increasing or is it more that you reduce the lead time to customers and so on? And maybe if you could touch upon how it affects your ability to address the DTC segment.

I can take that. I think what we're doing generally is we are taking over warehousing that today is covered by outsourced 3PL logistics provider. So we're taking over warehousing and bringing it in-house. And with that, we're reducing... we're reducing double handling, where we then ship it to a warehouse, which then ships it on to end customers. So we are definitely increasing capacity. We're tripling, obviously, the capacity of pallets in the warehousing program, but we are reducing one step in the materials handling. And we are, enables us also to kind of grow our logistics service to include both DTC and regular customers across Europe in a good way with good delivery times.

And it doesn't sort of affect your DTC?

No, no. I mean, we still supply DTC today and we'll do it from this warehouse in the future.

So, yeah. Okay, great.

Well, thanks. That's all from me. Thank you.

Thank you very much. We currently have no further questions, so I'll set the hand back to the management team for any further remarks.

Thank you very much, everybody, for joining this call. We wish you a good day and hopefully a good summer and look forward to speaking to you again at the Q3 report, if not before. Thank you very much.