Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mips AB (FRA:7M1, Financial) reported a strong quarter with 31% organic growth.
- Gross profit increased by 37%, with a gross margin of 72.9%, up 3 percentage points from last year.
- The company saw good development across all categories and regions, particularly in the bike and snow segments.
- Mips AB (FRA:7M1) continues to increase market share and penetration globally.
- The company has a strong cash position with SEK266 million in cash and no loans.
Negative Points
- Market conditions remain challenging globally, particularly in the retail environment.
- Volume development in the safety category was slower than expected despite good interest in the US and European markets.
- The construction market in Europe is very challenged, impacting the safety segment.
- The company had to hold back on some recruitments for one or two quarters.
- There is uncertainty in the market, and some brands have very thin balance sheets, which could affect growth.
Q & A Highlights
Highlights from Mips AB (FRA:7M1) Q2 2024 Earnings Call
Q: Could you explain the stronger-than-expected recovery in the bike category?
A: Max Strandwitz, CEO: The recovery is driven by customers buying from us again, replenishing inventories with Mips-equipped helmets, and our market share gains. Additionally, new helmet models equipped with Mips technology are hitting the market, contributing to the growth.
Q: Will the pipeline of new model launches continue into next year?
A: Max Strandwitz, CEO: Yes, the rollout of new models will continue into 2025. We expect the market to remain challenged throughout 2024, with a more normal market situation anticipated in 2025.
Q: What do you mean by a "normal market situation" in 2025?
A: Max Strandwitz, CEO: A normal market situation means starting fresh with normalized inventory levels and a stronger consumer market. Participation levels in cycling and commuting remain high, which should drive growth.
Q: Why haven't we seen volume pick up in the safety category?
A: Max Strandwitz, CEO: The slower-than-expected volume is not due to certification delays but rather timing of orders. We expect volumes to pick up in Q3 and Q4. The US construction market remains strong, which is positive for our safety category.
Q: Are you comfortable with the current cost base, or do you see a need to increase spending?
A: Max Strandwitz, CEO: We are comfortable with the current cost base but will continue to invest in strategic priorities like marketing and R&D. We have started recruiting again, especially on the engineering side, to support new projects.
Q: Is the momentum in the bike category driven by larger customers or a wide recovery among smaller customers as well?
A: Max Strandwitz, CEO: The recovery is broad-based, with contributions from both large and small customers. European brands are driving performance more than North American brands.
Q: Can you elaborate on the strong development in the Asia and Australia regions?
A: Max Strandwitz, CEO: We have initiated educational programs in China to explain the benefits of Mips technology. This has started to show positive results, particularly in the bike helmet category.
Q: What risks should we consider within the bike segment that might affect growth?
A: Max Strandwitz, CEO: The main risks are uncertain market conditions and the financial health of our brand partners. However, we are confident in our strategy and market share gains.
Q: Can you explain the decrease in the number of employees in Q2?
A: Max Strandwitz, CEO: We made some organizational changes and held back on recruitment for one or two quarters. We have now started recruiting again, particularly engineers for product development and implementation.
Q: Were there any positive items affecting the gross margin in Q2?
A: Max Strandwitz, CEO: The gross margin benefited from a positive product mix effect and economies of scale. We aim to maintain a gross margin above 70%.
Q: What was the growth of snow and bike categories individually in Q2?
A: Max Strandwitz, CEO: Snow grew around 20% in the quarter, while bike grew between 40% to 50%.
Q: Do you expect bike growth of 40% to 50% to accelerate from here?
A: Max Strandwitz, CEO: Given our expectation of a gradual recovery, we could see somewhat higher growth numbers in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
