Knaus Tabbert AG (KTA.DE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and a warm welcome to today's earnings call of the Knaus Tabbert AG following the publication of the Q3 financial figures of 2025. We are delighted to welcome the CFO, Kim Sefzik, who will speak in a moment and guide us through the presentation and the results. We are looking forward to the results. And having said this, Mr. Sefzik, the stage is yours.

Thank you very much. Good morning, everyone, and welcome to our call. Thank you for joining us today to discuss our third quarter results and recent development. Over the past months, we have continued to work through the realignment of Knaus Tabbert, addressing the operational and structural challenges while strengthening our foundations for the next phase. Today, I will start with a brief overview of our progress and the current market environment before we discuss the financial results and outlook. Let me first give you an update on our strategic realignment and start by recalling where we stood a year ago, which I consider the necessary context to then discuss where we have landed and where we are going. When Willem de Pundert and I stepped into our roles soon to be 12 months ago, the company was in an altogether worrying situation across its business and its balance sheet. Overdue receivables, part of which we would ultimately never be able to convert into cash. Excess inventories on our balance sheet, but also balance sheets of our dealers, part of which we would ultimately have to take back and remarket carrying some of the related losses. Uncertainty about speed and commercial conditions at which we can place all of the old products across our and the dealers' balance sheets in the then oversaturated market. The distribution channel under severe strain with dealer insolvencies piling up, driven partially by own business decisions of the respective business owners, but exacerbated by the overproduction of the OEMs, an order intake that showed very modest movement for months with some dealers unable and some unwilling to commit to Knaus Tabbert. Legal and compliance topics with the police and public prosecutor activity having put a spotlight on us and together with commercial worries, made many external and internal parties uncomfortable overall, resulting in a very heavy load on our organization to convince all stakeholders that we have the situation under control, with internal forensic audits, reviews by external advisers for the benefit of the banks, separate audits by suppliers and ultimately, an audit by KPMG as our auditor. And last but certainly not least, a bloated cost structure, partially due to managerial excesses, but also scaled to deliver volumes the market was no longer able to absorb. This then framed the situation in which the Knaus Tabbert team was putting together a plan to bring the company into calmer waters. I will now not go through the steps that we took as that has been discussed many times. But let me at least highlight more the approach that we have been taking since. We have, in the past 12 months taken great care to ensure that our disclosure represents a fair picture of our situation as painful as it sometimes was as we would certainly all be happier if our announcements to the market were predominantly of a positive nature. We endeavored to communicate with the market, but also the press and other stakeholders as openly as we felt we could, which in the context of restructuring of a publicly listed company is a challenge, especially if one is managing this company through a complex and very uncertain environment I described earlier. And we are gradually ticking off the list of issues that form the original black box of problems that we were carrying with us as outlined earlier. And as we cannot control the economic uncertainty, which is a natural part of any business, we are at least working hard to proactively address topics we have on our radar, while reacting quickly but with consideration to developments that were not. As we discussed on our last call in early August, the summer marked the point at which we could report tangible progress with the initial cleanup. We highlighted our successes in adjusting the cost base, improving working capital and generating liquidity, moving towards normalized inventory levels, both within Knaus Tabbert and across the dealer network and introducing a restructured product range. But we also acknowledged that not everything was going fully to plan. The market remains saturated, not only with our own products, but also overall. While we factored this partially into our planning, the full extent of the oversupply was not known and the resulting continued price pressure necessitating sales promotion measures was higher than we forecast. Cost measures have overperformed in some areas, but underperformed in others. Personnel costs, for instance, remain above plan due also to lower productivity and higher illness rates, which limited our possibility to use short-time work. Dealer prudence is still high. After several turbulent years, many remain cautious. This is not supportive of planning stability of our production. Combined with our commitment not to produce on stock, this has made our supply chain tighter than we would prefer. Following the Düsseldorf trade fair when orders accelerated, supplier readiness lagged, requiring us to review our production assumptions for Q4 despite a reasonable order book. Our ambition to accelerate production late in Q4 has then hit another roadblock earlier this week when we're informed of more delays, prompting us to take initial steps to replan our production further and correspondingly inform the market. And last, we also highlighted the impact of operating leverage where even modest revenue deviations like due to the production replanning I referred to above, have an outsized impact on annual profitability due to limited short-term flexibility and the heavy Q4 weighting of our annual earnings. As expected, the Düsseldorf fair acted as a catalyst for the situation and a test of our assumptions. It confirmed that end customer demand remains strong, validating also our product strategy and pricing repositioning. Our cost-cutting measures in areas like marketing had little, if any, negative impact on sales momentum, which was very positive. While stock levels of our products are approaching normalization, the market still suffers from residual oversupply, leading to continued pricing pressure in both the Premium and the Luxury segments. Dealers are cautious in forward commitments. They prefer deliveries in Q1 rather than Q4, meaning we had to actively manage order intake to maintain our production run rate through year-end. As a result of the above-mentioned factors and taking into account the impact of the fluid situation also in our supply chain, we have now once again replanned our production for the remainder of the year and updated and now also further refined our full year guidance. Operationally, we are working with our dealers to position them well for next season, focusing on both our strong domestic markets as well as supporting our international presence to gradually diversify our revenue base. We're advancing developments for model year '27, which we will launch next summer, the key to our medium-term competitiveness. We're preparing next year's budget plan, reviewing all assumptions in light of healthy demand, but persistent margin pressure and a strongly competitive environment. And we're driving productivity improvements, which will take several quarters and some a couple of years, require targeted investments but are essential for sustainable efficiency. And throughout, the backbone of our strategy remains the strength of end customer demand, which provides stability as the broader industry gradually rebalances and as we are running our restructuring efforts. And this backbone is a topic we address on the next slide. The most important conclusion from this slide is there has really been no fundamental change from our earlier presentations. Let me first explain the slides to you just to orient you around. We are talking about both the European and German registrations. We're using September till August, September 24 to August 25, which is the full model year. And as you can see, when it comes to our motorized units, and that's the dark blue, that market has remained very much stable, both in Europe and in Germany. When it comes to the caravanning segment, which is the light blue color, that market has shrunk by around 10% and is currently moving towards more stabilization, but still slightly declining. And when it comes to our market shares, these have also not changed significantly since we last presented to you in August, being relatively stable, our market share in motorized vehicles decreasing slightly, while our market share in caravans increasing. Moving on to the next slide. Just a very brief insight into the Caravanning Salon. I will not go into details here, but it was a show that also from our discussions with our partners and other competitors indicates that it has been positive for the industry overall, not only for Knell Strbertt. We have been represented with an amended strategy: we cut down our expenses, moved all of our brands into one hall, rationalize our costs, simplified the product offer that we're showing on a limited space. But overall, it has not resulted in any negative impact on our numbers. We achieved more than 10% higher end customer sales at the show, and our dealers have been very satisfied with the way the show has run also with follow-on business that followed the show. On the next slide, we then dive directly into the financial results for the first 9 months of 2025. First, let me speak about the order book, which has climbed to EUR 476 million, which is still not high, but it is up from EUR 294 million that you will have seen at the end of the second quarter, and it does provide a certain level of stability for our production, obviously, subject to our supply chain being able to keep up with us, which, as you will have seen yesterday, has been difficult. When it comes to revenues, the first 9 months of the year allowed us to bring in EUR 762 million. And with that, we generated an adjusted EBITDA of EUR 19.8 million, resulting in an adjusted EBITDA margin of 2.6%. Our free cash flow in the first 9 months of the year has amounted to EUR 60 million. When we look at the segment split, the revenue in the Premium segment reached EUR 637.3 million, which is down almost 20% of 2024. But again, we probably don't have to walk through the specifics of the prior year and gave us an EBITDA of EUR 11.3 million. The Luxury segment revenue amounted to EUR 124 million, down -- sorry, up 11%. But the profitability, and I hinted at that earlier in my presentation, has been impacted by a very strong competitive environment and reached EUR 5.4 million in the first 9 months of the year. Moving on to the balance sheet indicators. Let me start with net working capital, where you do see a further improvement. That comes from a slight improvement in our inventories a relatively strong improvement in our trade receivables and a stable situation in our trade payables. But overall, the effects of Q3 have clearly been less material than what you will have seen in Q2, which is also driven by the specifics of that period and also the seasonality of the end customer market. Looking at net debt, that has increased to the level of EUR 289.7 million. And just to proactively address what could be seen as a discrepancy between an improvement in working capital and the increase in net debt, let me just address the Q3 in a way for you to understand that Q3 is also a time where we do settle our tax liabilities. We also settle our dealer bonuses. And we also -- there are also certain liabilities that we've accumulated towards our employees, not the least for holidays, which are also settled and that has an impact on the cash situation of the company outside of its regular operations. And now moving on to the last slide, our outlook for 2025, where on the basis of the decision that was taken yesterday to replan our production, we have informed the market that we expect to achieve around EUR 1 billion in revenue, and that number is not -- has not changed and an adjusted EBITDA margin at the bottom of the range that we've indicated in our release in September of 3.2% to 4.2%. With that, I would conclude the presentation, and I would like to open up to questions.

We will go on to Elis Al.

Radim, two from my side to start off with. You hinted a little bit about the profitability of MORELO. It would be great if maybe you could elaborate a little bit more about what's going on there. Obviously, the trend in profitability this year has not been great. So just some more insight of that. How is your capacity utilization there going? Just give us a more clear picture of what's going on with that particular segment. And then just a bit of a curiosity about the ad hoc release last night. I mean you guys are still within your previously communicated guidance. I'm just wondering what the urgency was to get the news out last night. Just pointing out that ad hoc of late have been coupled with a bit of an anxiety from the investor side. So just curious about the transparency on that, if there's anything else in there that we should be worried about? And I'll leave it there for now.

Thank you very much. Let me maybe start with the second question, and that's the ad hoc. You're right, we are within our guidance range. But under disclosure rules, we also must release price-sensitive information as soon as it arises. And the reality is we did have an ad hoc committee yesterday, also with support of external counsel, and we received a very strong advice that it is in the interest of the -- or within the market disclosure rules and the interest of the market for us to release the information immediately. The ad hoc as such has to be issued right away, and it doesn't matter whether the results then follow shortly thereafter or not. The decision about the replanning was driven by the information that we've received, and we're literally talking hours. So 24 hours prior, we received the information, we confirm the information. We tried to work with that information. We then built several cases of what we can do with that information. And ultimately, yesterday afternoon, we took a decision to replan the production. It's still a developing situation. But at the same time, I think we're relatively comfortable now with the decision that we've taken. And the moment that, that decision was taken, we called the committee and we're strongly advised and also ourselves within the overall ambition to be open with the investor community, we simply decided to release the information immediately. That's on the ad hoc. When it comes to MORELO, I have to be relatively careful there because ultimately, it's a small market. There are only a few players. So whatever comments I make, I'm implicitly making comments also about our direct competitors, which I would like to avoid. So let me just speak mostly about MORELO as such. MORELO is actually performing relatively well. The products are very well accepted. They are working to make sure that they hold their market share, which, as you know, is relatively high in that particular segment. And I would say the capacity utilization has been adjusted already earlier this year. And so right now, we're simply waiting or that's the view of the market that we have right now that we need to wait for the market to digest the overall volumes of inventories in the market, most of which are not ours. To then be able to generate the margins that we would expect of MORELO. So as such, I'm a little bit less worried about MORELO per se. I would rather say we simply need to be patient with the market to then ultimately be able to bring MORELO back to the levels of profitability that you would expect and we would expect. So I hope that addresses your 2 questions, but happy to take follow-ups.

If -- so the profitability, I mean, the sales have been good, but the profitability, is that because of lower capacity utilization? Can you be a bit more specific on why that's just declined so much? Is it discounting?

Yes, no, no, it's a combination of factors. Let's say, pricing pressure is one of them, definitely. The cost structure partially as well, but that is not unlike the situation that we have where certain suppliers have been difficult for MORELO, and that has caused some of the unfinished goods to go up and then you need to work on those products afterwards to finish them, which creates inefficiencies in production and higher costs. But I think these will probably be the 2 main effects that have led to this profitability in the Luxury segment.

And with this, we will move on to Alessandro Cuglietta.

Radim, can you hear me?

Yes. I can hear you.

Okay. Great. Could you just come back on the production delays? I mean the supply chain issues you're seeing, can you be more specific on that? I think you already mentioned that earlier, but what's happening exactly in the supply chain?

Understood. I will do. So the situation actually spreads across a couple more suppliers. It's not one single supplier. But the decisive element for us has been one chassis supplier. I don't want to speculate on the situation with that particular supplier. But my understanding overall is such that the -- many of our suppliers have downsized their capacities and have not been willing or in the short run, not able to then ramp them up again to a gradually normalizing market. So when after the Düsseldorf fair show, not only Knaus Tabbert as per our information, and again, this is indirect information that we're receiving, but also other of our competitors have gone back to a higher level of ordering of chassis for a more normalized production level. Certain suppliers, and again, this is not limited only to chassis suppliers, but also a couple of others, have had difficulties ramping up their production, which has been limited alongside the whole industry in the first part of the year. And that has led to a certain bottleneck, which we would hope could normalize relatively quickly, but it has certainly had an impact on our planning for Q4, which is immediately after the Düsseldorf show, where we expect it to be able to really produce at speed. And instead, we have to be a bit more prudent with our production, and that was effectively the result.

Okay. So it's more short-term bottlenecks instead of more pronounced issue. I mean you're expecting this to resolve quite fast?

I mean we are expecting it to resolve quite fast. That is true. At the same time, in our risk management, we still have increased the level of that risk from very unlikely to unlikely. So we still consider it unlikely that this will be something that will be with us for a long time. But in itself, we -- let's say, we were surprised by the magnitude of the impact we're seeing right now. So we want to be relatively careful assuming that this will normalize immediately, and we will not see any more impacts in the coming quarters. But right now, we don't find them as likely.

Peter, you should be able to speak now.

Can you hear me?

Yes, we can hear you now.

On the Q3 figures, on the 1 to 10 scale, how disappointed are you in the Q3 figures? And you can use for me the same scale for how much impact this Q3 and your press release of yesterday has on 2026. So you're talking about 2025, but how much impact does it have on 2026?

Understood. I'm trying to stay away from qualitative assessments on a live recorded line. But frankly speaking, no, I don't think Q3 was a success, to be clear. It's -- we would have hoped for more. Some of it was driven by outside factors, but some of it is something that is down to the performance of our business. And so I would certainly not be considering myself happy with the Q3 results. Maybe let me put it this way. I don't want to assign a number to it, but I think you understand the direction of my answer. When it comes to 2026, we're currently in the process of budgeting, so I will stay away from judgments on 2026. But it -- and we tried to also express it in the message that we sent out to the market yesterday that also in the context of what we see in the market and also Q3 numbers, et cetera, et cetera, we are going forward with reassessing the situation we see in the market and making sure that we also take appropriate measures to adapt the organization and our strategy to the market that we see coming to us next year.

Does that answer your question, Peter? Your microphone is still on.