Thule Group AB (publ)

Good morning. Thank you for attending today's Thule Quadra III Interim Report. My name is Sarah, and I'll be your moderator today. Our lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, press star 1 on your telephone keypad. I'd like to pass the conference over to our host, Matthias Eckenberg, CEO. Please go ahead.

Thank you very much. Welcome, everybody, to this call. I am, as usual, also joined here by Toby Lawton, our CFO. We'll be speaking to the presentation, and the presentation will be available at our IR website following this call. So... Starting from the top, it's a quarter which in many ways are in line with the year that we've seen before, with the exception that profitability is improving in a better way. So good profitability in a continued tough market. Sales was up in total 13% versus last year, excluding currency effect, which is the same trend we've seen with the year so far. We do continue to see a weak market with cautious consumers and retailers. We'll speak more about that. Organic growth is down 4% in the quarter, which we, of course, are not pleased about. And currency effects continue to be significant, minus 5% in the quarter. We are actually pleased about the performance of our new product categories and our new products, which add sales in the quarter, as well as the acquired Cordlock business, which continues to add sales and growth. EBIT margin was 17.9% in the quarter, which is higher than last year and also higher than the historical averages for the quarter. We had a strong gross margin up to 47.5%. SG&A, excluding the acquired Cordlock business, decreased versus last year. We have mentioned before that we would face R&D costs and launches differently this year, which helps this quarter. And other SG&A costs are also actually a bit lower. And the margin increase versus the last year is driven by the Tule business, excluding the acquired Cordlock business. In all, EBIT increased to 453 million SEK up from 413 last year. We continue to generate good cash flow from operations, 668 million. And the working capital patterns have been now returning to what we've seen historically. Toby will get back to that later. And we continue to reduce inventory. We have a target of reducing it further 200 million SEK. This year, which will be then the third year in a row, we take inventory down, and that is on track. On the highlight side, we do continue to see good development of our newest product categories, and we've launched a few new products. We'll come back to the details, but both dog products is performing really nice, including Thule Cappy, which was just launched at the very, very end of Q2. And during Q3, we have launched a high back booster seat, child car seats for a bit older children called Tulle Palm to now have a complete premium car seat portfolio for kids of all ages. And we have continued to work hard on the changes in North America that continue to give results. Moving to page three and stepping back before we come into details. With this quarter now in the books, it adds to the long-term trend we've seen over a decade or so of profitable growth for Thule. In the last 12 months, we have a net sales of just over 10 billion SEK, 10.3, an EBIT of 1.7, and an EBIT margin of 16.1. So having zoomed out, let's zoom back in. Page four, starting with the regional perspective. As mentioned in the intro, it is still a challenging market across basically all regions. In region Europe, which is by far the biggest region for us with 70% of the sales, we are now year-to-date flat on organic sales. All these numbers refer to organic sales. after a weak end to the spring-summer season. So let me give you some more color on that. We continue to see a quite promotional market with cautious consumers and retailers. We've actually had pretty good growth, organic growth in Europe during the high season. It was a plus 4% during Q2, and it continued to be a good start to the summer season at the start of Q3. But we clearly see an end-of-season effect where retailers are very cautious at the end of Q3 to replenish spring-summer products and mindful of inventory levels, which clearly impacted the sales for the full quarter negatively. And what's positive to see, though, is beyond that, that the newest categories, which have had a good start in Europe recently, Car seats is a European effort for us and continue to grow really well, as well as do the dog products. In North America, we continue to see that region as the toughest region for us, the toughest part of the footprint that we operate in. Organic sales was 5% down in the quarter, which is slightly better than the year-to-date number of 7%. We did have a very weak start to the quarter following the announcements of the tariffs, and we communicated quite a lot of actions that we made during the first part of the year that we continue to see give positive effects. So there are some actions related to cost, but regarding the organic sales, we have changed the growth priorities. We have launched quite a lot of new north american specific products this year and the big difference in the performance in q2 and q3 versus earlier in the year is the uh bike carriers for the north american market that continue to do really well and adds good sales for us so in overall it's in the right direction compared to the start of the year but still an opera of course we want it to be Region rest of the world, clearly our smallest region with just 6% of the share, improved in the quarter, organic sales of plus 11%. It's a small region, and we typically see some quarter-to-quarter movements, so probably not read too much into that number, but it is nice to see that that's the... spring season starts in the southern hemisphere, we see also good growth in some of those markets and the trend improved in both the Asian market and in Latin America for us. Switching to the category perspective on page five, the picture is similar in many ways, but we're starting with sport and cargo carriers, which is our biggest product category. We have a year-to-date minus 1% organic net sales and a bigger negative in Q3 following a better Q2. And again, we do see actually underlying this good growth from our new Thule products this year. We have upgraded our best-selling bike carrier called Thule Easy Fold to Generation 3. That's really well in the market. We have introduced a mid-price bike carrier called Thule Outpace. That's very nice growth for us, both in Europe and North America. We have, as mentioned before, launched North American specific bike carriers. And for example, to the Rebirth, the hanging bike carrier is doing really well. And also on the cargo side, cargo box side, the rear of cargo products, the tow bar mounted products also continue to see very nice growth. But again, it is still a challenging market situation. We do continue to see the best performance in the premium and the toughest space to be in North America. And I think I've already talked to the replenishment effect of the spring and summer product in this category. RV products continue to grow despite the weak market. And it's very much the same trends as we've seen in the last quarter. Industry is going through a challenging period. And we do continue to see a decline in sales to the The OE channel and good growth in the aftermarket channel. And it's also, I think, pleasing for us internally to see that the new products we've launched in the last 12, 18 months really make up for all the growth that we see in the RV business, both in the quarter and this year. A good sign that the new Tuller products are delivering value. Moving to the next page, the last two product categories. Active with kids and dogs is a similar picture as previous quarter. Net sales down 7% organically in the quarter, three for the year to date. Dog transportation continued to do well. The premium dog crate Tula Alex that we launched now 18 months ago is continuing to grow very nicely. And the recently launched crust-tested dog harness Tula Cappy It's done really well right out of the gate. And as mentioned earlier, we do see continued good growth in child car seats, and additionally so by introducing the high-back booster seat to Le Palme in the quarter. Our strollers, all-terrain and running strollers, continue to do well, but active consumer is still there and wants to spend money on great product. But we do see a decline, which unfortunately outweighs these growth areas for us. And the decline is related to bike-related products in general for children, where retailers are cautious on inventory. We do continue to see growth on D2C, T2D.com, which is a sign at least that consumers are interested, but the retail inventory situation is taking the whole category to a negative spot. Bags and mounts, we continue to see good growth from Performance Full Mounts, the acquired QuadLock business. So organically, that is excluding QuadLock, net sales is down 5% in the quarter, which is an improvement from the trend earlier in the year. And including QuadLock, of course, the number is a very big plus. QuadLock now accounts for two thirds of this category. QuadLock continued to grow nicely. 5% organically about in this quarter, which is a bit lower than the trend before. And that's the only reason is that there was a major new retail customer introduced in the third quarter last year, which takes the percentage down. But the growth trend continues really nice and is now at a 15% year-to-date growth development. And the bags and luggage business, the other part of the bags and mounts category, is improving, although still not at a plus. It's nice to see that the Thule brand is actually back to organic growth in Q3. We have launched a few new products, including a new collection of our best-selling duffel bags, Thule Chasm, which was well-received and clearly helps. But we do see a continued decline in the sort of legacy business, in the CaseLogic brand and in the OA products that continue. Turning to page seven, as mentioned in the introduction, in the quarter, the margin was helped by efficiency improvements and cost control. So I wanted to share a few words on that. Firstly, there is, of course, a benefit for the quarter of lower R&D costs in the quarter, which is due to phasing, as shared and communicated previously. This is an intense product launch year for us also in 2025, and we have decided ahead of the year to take a more front-loaded launch calendar. to capture more of the high season. And that meant higher R&D costs for the first half of the year, but also then consequently lower for the second half. And that's what we see now coming through in Q3 just as planned. So that helps the margin for the quarter specifically. Additionally, though, we do see some efficiency gains that clearly support the margin both on the gross margin side and on the SD&E side. I think just to give you a few examples, we have quite some unutilized manufacturing capacity and we have increased insourcing to take better use of that. That helps the gross margin. We've actively consolidated third-party warehousing services that helps the SD&E. And we have continued to trim processes and cost efficiency around admin sales and marketing with help of automation and digitalization, which is also helping SG&A to improve. So we have a bit of a small land culture here in this company, of course, and it's nice to see that the continuous efficiency gains also are visible in the results. And then in addition to continuous improvements, we are driving a few structural cost initiatives that are not giving so much effect yet, but will, and they are on track. So firstly, we have changed the cost in North America with the new organization and closure of a satellite office that we shared in Q1. We shared in Q2 that we are automating and extending a warehouse in Poland, which is expected to give annual cash savings of about 100 million SEK, full effect 2028. And that's on track. And thirdly, we've also spent a good effort this year on developing what we call technology platforms. So using common components across different products and product families to, of course, create a more efficient manufacturing system. set up and combining that with more in-house component manufacturing. And that's the work that we've been driving this year quite hard and is now ready to be in place to support profitability for next year. So with those comments on the short and long term of control and efficiency, I will turn to Toby to go through some of the more financial aspects.

Great. Thank you, Matthias. And good morning, everybody. If we turn to slide eight and I'll start off looking at the quarter three number and we had revenue, you can see in quarter three here of just over two and a half billion sec in quarter three. That's eight percent higher than quarter three last year. So the reported sales growth was eight percent. The biggest factor there is the acquisition of Quadlock, of course, which is adding 17 percent on quarter three. On revenue, but we have a significant negative from FX, which is important to remember now. So that impacts net sales negatively by 5% this year because of the primarily the strong SEC. And organic growth, as Matthias mentioned, in the quarter was minus 4%. Gross margin has increased to 47.5% in the quarter from 42.9% last year. The biggest factor behind the increase in the gross margin is the acquisition of Quadlock. So that's a bit more than half. But we have price mix and supply chain efficiencies, which are also giving a good contribution as well. So bringing the gross margin up to 47.5. So a good development there. When it comes to EBIT, we report an EBIT in the quarter of 453 million SEC. We had 413 million SEC in the same quarter last year. And that means the EBIT margin as well is 17.9% this year versus 17.6% last year. And this is a few factors impacting the EBIT margin. Obviously, the gross profit, the phasing of the selling expenses driven by the product launches more towards the first half, which Matthias mentioned, is obviously a factor. And then further cost efficiencies in SG&A, which also are contributing to the improvement in margin together with QuadLock. And I think when you... take these effects. It's a good performance to see the increase in profit. And if you exclude the acquisition of Quadlock, the SG&A costs have actually come down in the Tula business, excluding Quadlock as well this quarter. And also worth mentioning, when you look at the EBIT margin, Quadlock is accretive to the Tula EBIT margin. But the biggest factor behind the EBIT margin increase versus Q3 last year is is also, again, the Tula business excluding Quadlock. So a good performance. And obviously in a quarter where organic sales growth is negative, it's even tougher to hit EBIT margins and EBIT targets. So a good performance on the cost side. Net interest expense in the quarter was 37 million and effective tax rate in the quarter, 24%. Just turning then to the year-to-date numbers, which you see on the far right-hand side, here we have reported sales growth of 9%. We're now three-quarters of the way through the year, and organic growth for the three-quarters is minus 1.5%, and here it's flat in Europe, our biggest market, and negative 6.7% in North America. And here again, the QuadLock acquisition is adding 15%, and FX has been negative all year, so it's minus 4% also. on the year to date. The gross margin improvement we've seen throughout the year. Again, QuadLock is a major factor, but also price mix and supply chain efficiencies. So we have a gross margin year to date for the first three quarters of 46.2% versus 42.9% last year. And adjusted EBIT is also 1588 million SEC versus 1557 prior year. So that Altogether means then when you say the year-to-date numbers are EBIT margin is 18.5% versus 19.8% last year. If I just turn to the next slide on the cash flow, and this was a good quarter for cash flow. We had cash flow from operations in the quarter of 668 million SEC. which is obviously a good cash flow and a big contribution from a seasonal decrease in working capital. Q3 is usually a good quarter for cash flow, and it's been, again, a good quarter for cash flow this year, so driven by that working capital decrease. When you also take into account the capex in the quarter, we had 140 million sec of capex in the quarter, primarily relating to the automation and extension of our warehouse in Poland. And when you take that off, we basically have a net or free cash flow of around 500 million SEK. And that's meant that we were able to amortize our net debt also by 500 million SEK. And finally, to mention that we are reducing inventory further this year and our inventory target that we have had all year of reducing inventory by a further 200 million SEC on top of the big reductions last year and the year before is on track. And finally, the next slide, slide 10, the net debt to EBITDA where we have a high focus. And as I mentioned, net debt has been reduced by 500 million a sec in the quarter, which drives the ongoing deleveraging that we're seeing here. And you can see the net debt to EBITDA ratio is now down to 1.81. So with that, I'll hand back to Matthias.