Mips AB (publ) (MIPS.ST) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Mips Investor Presentation Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Max Strandwitz, CEO. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to the Mips presentation of the KOROYD acquisition. My name is Max Strandwitz. I am the CEO of Mips. And with me today, I also have Karin Rosenthal, who is the CFO of Mips. The presentation today will be about the acquisition of KOROYD, but for me, it's much more than an acquisition. It's a merger of two great companies with two great brands and a very strong cultural fit. It is seldom that you can find really two complementary acquisitions with great strategic fit. But this one has, for sure, a lot of those elements. And I will explain why in the coming part of the presentation. So I think first of all, it's important to look at the acquisition logic. Why are we doing this? Mips strategy is built on 3 pillars. As you remember, and actually, the acquisition of KOROYD strengthens 2 out of 3, which is, of course, great. Yes, there's a reminder of what is our strategy. Of course, the most important one so far has been about growing our existing business of rotation protection solutions in helmets for sports motor and our safety category. Second has been to capture new opportunities within helmet and safety. And there, of course, KOROYD ticks that box and, of course, opening up new channels and new markets, and it does tick also those boxes. So really 2 out of 3, which is normally a great fit. And then indeed, KOROYD has a lot of similarities to Mips, vision and purpose driven to make active life safer, market leader within its niche, ingredient brand trusted by consumers and leading product brands, science and technology-driven companies, world-class testing and simulation capabilities scalable, asset-light supply chain and high EBIT margin despite a significant R&D spend and investment in product development. This could be Mips and very similar to what we do. And then, of course, KOROYD, it will continue to operate as an own brand. We think the team has done it great. And of course, we will continue to support them on that journey. There is a very current, strong, very capable leadership and operational team that will continue to drive the KOROYD business. But of course, both brand teams see many synergy opportunities on product development and product portfolio expansion. And we will talk a little bit more of that coming slides. I think it's always important to start with the history to understand a company, and of course, KOROYD has a great history. It started and was founded in 2010 by the founder, John Lloyd. Then in 2012, the first product came out with KOROYD, which was actually a Nitro superlight snowboard, which was, of course, game changing in this industry and a game changer when it came. In 2013, they launched their first bike helmet with KOROYD, which was together with the Smith brand. And 2015, the first Skis with KOROYD dampening was launched with Salomon. In 2017, the first motor helmet with KOROYD was launched to the market with KLIM. And then in 2019, the first award winning mountain bike helmet with both Mips and KOROYD was launched with the brand Endura. In 2021, the first Child Car Seat with KOROYD, Uppababy was the brands that launched that. And then, of course, in 2023, KOROYD hand protection for gloves was introduced. And then in 2024, the first type II full-brim helmet with KOROYD was launched on the market, which has been a great success. And then in 2025, body protection was introduced to the market. And of course, this say something KOROYD has always stayed very curious, but it also shows how versatile the technology is and the many application areas it could address. And I think also important to understand what is the basic of the technology, KOROYD is very technology-driven similar to Mips and to really understand what they do, it's really important to understand what the technology does. So KOROYD and energy-absorbing technology built from thermally welded extruded tubes that crumble on impact. So it actually collapses that impact, and you can manage density in a very versatile way. So if you want to manage a tougher impact, then you need to make the density harder, of course, and a softer impact, then you make it softer. So really a lot of great advantages when it comes to energy absorption. And that, of course, is why we have the presentation today. If we then look at their product portfolio, and this is, of course, only 3 out of in 5 total areas. But today their main business is on what we call the KOROYD original. So the original business, and that was what I just explained, which is, of course, applications for helmets, child restraint system and ballistic vests and that's very much on energy absorption. And then the second one, which is a very interesting area for us when it comes to body protection. And when we talk about the body protection market, it's, of course, enormous. It's actually bigger than the helmet market in total with a lot of different areas of application. And there, of course, KOROYD has developed a unique body armor with a patented structure and also custom TPE formulation which is, of course, a thermoplastic elastomer, which makes it really good to manage energy. At the same time, it maintains an extremely high ventilation and also flexibility, which also makes the product unique on the market. And also explains why it has been received in such a great way, especially in reviews, but most important also by the end user. And then the third area, which is also completely new to Mips, which is KOROYD Plus which is a glove system. It can be used in other areas, but today, it's used in gloves where they combined the KOROYD tubular technology with a flexible elastomer to manage energy and reduce hand fatigue. So a really glove for heavy-duty work, but still maintaining flexibility, which not a lot of other products can manage today. So just an example of 3 great product areas where KOROYD is making an expansion in today. If we look at the business model and the way the business is structured, of course, KOROYD operates as an ingredient brand in close partnership with a leading product brands. They have a large share of the staff work in R&D and product development, 11 out of 25 employees in total. And of course, they have a state-of-the-art test facilities in Monaco, really strong innovative product portfolio with, of course, supported by heavy IP protection and our production is outsourced to trusted long-term supply partners, where KOROYD the key manufacturing equipment at core product suppliers in Europe and post-processing and molding located geographically very close to the customers. If we look at the sales split, today, the biggest part of the business is safety, so 58%. Then if we look at the other product category, which is sport and family, 37% and then 5% being in the motorcycle business. I will then hand over to Karin, which will talk a little bit about that transaction and a bit of the financial summary.

Good afternoon. I'm Karin Rosenthal, CFO of Mips. And looking at the financials in the transaction, the purchase price amounts to EUR 40 million on a cash and debt-free basis and that corresponds to a multiple of 8x on adjusted EBITDA for 2025. And in addition, the sellers also have the possibility of an additional earn-out of up to EUR 25 million, corresponding to a total multiple of 13x adjusted EBITDA. The transaction will be financed through a combination of existing cash and a credit facility. The acquisition is expected to contribute positively to Mips earnings per share, the EBIT and also the sales growth, both on the long-term and short-term basis. The acquisition is conditional upon Mips entering into financial agreement regarding the credit facility and also other customary conditions, and it is expected to be completed during December 2025. And then I hand over to you again, Max.

So if we then look at the vision, culture and the strategic fit, which is, of course, the most important things. If we start with the vision of the company, of course, Mips vision is to reduce head injuries and save more lives. And of course, KOROYD protecting life in Motion is 2 visions that resonates very well with each other. And of course, that's a very good start. If we then look on how the companies are structured, as you know, from Mips, we are heavy in engineers, especially in product development and R&D with almost 60 people working in that functions, of course. Similar to KOROYD, if the size of the business, they today have 11 people in product development and R&D. So also very innovation focused. Both companies, of course, have products that has been internationally validated by third-party testing and of course, by numerous product brands. And then, of course, both have unique capabilities with advanced simulation and also a state-of-the-art validation in their own test labs. So a lot of similarities and very purpose-driven companies with great innovation focus. If we then look at the customers' position today, of course, Mips has a unique position with more than 150 brands as partners today. KOROYD has about 25. And of course, we have a fantastic possibility of a great overlap between the 2 companies. KOROYD has a very close relationship with a lot of their customers. Mips has a lot of great customers. And of course, that will be a great customer fit for a lot of our partners. So if we then summarize the acquisition and a little bit where I almost started, strategic fit, great. We really tick 2 out of the 3 most important boxes, which is, of course, our strategic ambition. If we look at the company as such, a lot of similarities to Mips, very vision and purpose-driven to make active life safer. That's why we do it. And then, of course, really important, we will continue a 2-brand strategy. KOROYD will continue to operate as an own brand. And of course, then we will collaborate and leverage our synergies where it makes sense. At first glimpse, of course, in product development, having even more integrated products together and then, of course, marketing where we also see a lot of synergies. With that, we will end the actual presentation, but of course, open up for questions.

[Operator Instructions] And now we're going to take our first question on audio line and it comes from the line of Carl Deijenberg from DNB Carnegie.

So first question is on Slide #9. Just curious why the revenue growth has been -- we've seen such an uplift here year-to-date in 2025 relative to previous years. Is that similar to what you've seen in Mips as well with the sort of production rates coming back? Or is there any definite sort of product launches or yes?

No, I think, I mean, it's two different things, of course. First of all, it's a very successful business. They have had a lot of success in the safety category. And of course, that has been ramping up a lot of the growth. And then as other brands in our industries, we see that inventory situation has also normalized and that, of course, also fueled growth.

Okay. Great. Then I also wanted to ask a little bit on the sort of mix relative to your own mix. Obviously, KOROYD has a much, let's say, tangible mix relative to safety. And I just wonder if you could spend some time on talking about the history behind this and yes, did you enter this space much later relative to them? Or yes, could you give a little bit of the sort of background here? Because obviously, the expansion into safety is one which is quite important for Mips as well. So I just wanted to understand that.

No, I think -- I mean, first of all, of course, their solutions into the safety space is a little bit different because, of course, they make a bigger part of the product in safety. And they, of course, also have been very successful in the full-brim assortment where Mips is launching the first products now. And there, of course, you see that, that has generated a lot of growth. So they have done it really, really well. And we are, of course, launching similar type of products in the full-brim area.

Okay. Great. Then I also wanted to ask on Slide #12. I mean, you highlight these brands where you have a sort of already overlapping partnership in one sense. And is it possible -- I just wanted to understand sort of on also a model level, how much -- I mean, I understand that these brands seem to be more sort of bike-oriented relative to the other ones that I can see on this list. But could you talk a little bit about sort of model penetration? Also maybe how many models for these 6 brands together do you have both the Mips and KOROYD solution integrated in one piece?

Yes. I think the most -- the one that has the most penetration, of course, is the Smith brand, where you will see Mips and KOROYD solutions in most of their product portfolio, actually. I would say that's the one with the heaviest use of both products and so on. And then on the others, you see sometimes it's Mips, sometimes it's only KOROYD and sometimes it's a combination of the two.

Great. And just also finally, I see that you're not sort of specifying too much on the earn-out component of EUR 25 million. But yes, anything on timing and maybe sort of what is this based upon? Is this growth, profitability or both? And maybe what kind of growth rates do we have to see to reach this EUR 25 million to be fully paid out?

So we haven't quantified that. What we have said during the discussion, of course, we see a great potential of the collaboration. And with that collaboration, of course, you also share the risk. So the risk going forward is then shared through the earn-out. And of course, if we generate a lot of value, which we believe we are going to do, of course, we are prepared to share that. When it comes to an earn-out structure that we appreciate, of course, the main focus of Mips is, of course, to deliver substantial growth. So that's one and the key element of the earnout. And then if you look at the second part, of course, making profitable growth is also important. So then you can guess that, that's the second part of the earn-out. And then, of course, there are two areas where we see great expansion opportunities. And that's, of course, is in body protection and gloves. So of course, there, we also see an element in the earn-out. So we have structured it in a way we think makes sense. And then, of course, earn-out models normally spans across a couple of years. And of course, that's the same in this situation.

And the question comes from the line of Alexander Siljestrom from Pareto.

Congrats on the acquisition. So I was just wondering if you could talk a little bit about the cross-selling opportunities that you see, especially maybe in sports for KOROYD and then maybe in safety for Mips as well.

Yes. I think there is a great cross-selling opportunity. I would phrase it probably a little bit different, I would say, a more integrated solution because if you look at Mips, we have been extremely successful when it comes to rotational protection, KOROYD has been very successful when it comes to the linear protection. And of course, both of these safety aspects are needed into a helmet. And when you can combine the two, then, of course, you can create a lot more complete helmet systems. So I would say that developing a lot more complete systems will be a great expansion possibility. And it also makes a lot of sense for the customers where we can do much more of the helmet than we have done before.

Okay. That's interesting. And then maybe just on KOROYD sales mix in sports, what's sort of the bike versus snow share? Are they stronger or on snow? Or how does that look?

Yes. The strongest subcategory as we call it, is in snow. Yes, that's correct.

Okay. Cool. And then maybe on the patent situation, if you can expand on that. And also, you mentioned that they invest quite heavily in R&D over the P&L. Would you be able to share the share of sales in terms of R&D spend? Does it align with Mips?

Yes. So I think, first of all, when it comes to the patent protection, of course, the main protection comes from application patents or specific solutions and special protection for specific solutions because, of course, KOROYD is material technology. And of course, the right integration of that is key, and that's what they have been extremely successful in protecting. And then the second part is, of course, when it comes to the manufacturing process because, of course, when you have a material, you also want to make sure that, that is mounted correctly into helmet. So those are the two key areas which they have protected today. And of course, they have quite a long runway for those patents.

Cool. And the R&D in terms of sales, would you be able to share that?

Yes. We have not disclosed that, but given that you see that they have quite a big proportion of the total staff in product development and sales -- sales -- product development and R&D, you could expect that it's similar or a little bit higher than we have in Mips.

Okay. And then maybe a final one, just on the business model. I guess this is also a royalty-based business model, if you can confirm that? And also, is the gross margin also aligning with Mips at plus 70%?

So I think when it comes to the business model as such is a license model similar to Mips and of course, revenue is recorded on delivery. And then when it comes to profitability, it is gross margin that is below Mips, but still a very profitable company.

Okay. Cool. Maybe a final one just on the growth outlook and what you see there? Do you expect KOROYD to be able to deliver a sales CAGR ahead in line with what you have as a target for Mips? Or is it lower or higher?

No, I think there are great sales opportunities. That's also, of course, why we have the earn-out mechanism. I think we have managed during this process, of course, identified a lot of growth opportunities. So historically, they have been growing with a CAGR of 15%. Of course, we expect to accelerate that.

And now we take our next question and the question comes from the line of Emanuel Jansson from Danske Bank.

Hope you can hear me. Firstly, I would like to -- I wonder if you can shed some light. I mean, looking at the top line performance from KOROYD has been quite solid in a quite uncertain time period. But it is also -- are you also able to shed some light on how the 2021 figure was and how they have experienced the whole turbulent situation since the pandemic?

No, sorry, we haven't disclosed that number. But as most brands, of course, you saw quite a good uptick in Bicycle. But of course, they also serve other categories. So no, we haven't disclosed that, but my assumption is that they saw a strong performance also there, like most other in our industry.

Great. And regarding synergies on your cost base, could you maybe elaborate a little bit more what you can do on, for example, on R&D and marketing going forward?

So the business case assumes zero in savings. And the reason for that is, of course, first of all, we would like to grow the business and so on. I think the key synergies will come from learning from each other and, of course, developing joint solutions and so on. So no, we haven't put anything when it comes to savings opportunities from synergies. We expect to increase our spend to make sure that we also develop even better product in the future.

Interesting. And also moving a bit on the sales split, is it also possible to give some light on the geographical exposure from KOROYD? Is it mainly U.S. or Europe or...?

Yes. So today, they have a strong exposure to the U.S. market. Of course, their main customer in Safety Studson has a big exposure on the U.S. market. And then, of course, Smith being a strong customer. So mainly in the U.S.

I see, I see. And given that they have spent a lot on R&D, do they have like a big -- similar as Smith, do they have a big pipeline of new products entering the market in 2026? And have they been able to grow nicely on a number of models per customer as of today? And what's like the average number of models per customer?

I don't have the average number of models per customer. The model is slightly different. But I think, I mean, the way we look at when we would like to invest in a company like KOROYD, first of all, we look, of course, at the long-term potential. Is that there? Yes, it is. Where do we see the great opportunities and potential, of course, in what we call the KOROYD original business, really good product. In combination with Mips, I can think we can really create a fantastic product. The lightness of the KOROYD product is fantastic. I mean the product consists of 95% air, which is, of course, lighter than anything else. And then, of course, creating unique structures together also with our material technology team, I think we can really create a lot of solutions. That will be a great potential for growth. Then when it comes to the body protection areas, I think also if you look at all the reviews and product reviews, they have really got fantastic review results, and we see a great opportunity to continue to grow there. Of course, when we looked into this, we also looked at a lot of other providers in body protection. And by far, the best reviews that we have seen are with the KOROYD product. So really a great consumer offering. And of course, we expect that to take off quite well. And then, of course, the completely new area for us, which is then the gloves which are really another interesting area for us that we haven't explored. So yes, for sure, there is a lot of product coming. And these are, of course, the three areas which we have disclosed. But of course, they have done a lot more. And I think what they have also been extremely good at, like I said, staying curious, but also being very creative in really utilizing their technologies in the best possible way, just having the versatility of going to snowboards, skis, baby seats and so on, gloves, you have like a lot of different application areas. So I don't think there is a lack of opportunity for growth going forward.

That's really interesting. And maybe a last question from my side regarding safety then. Do you think that we will see a coexisting within safety helmet in the near term with both the systems in the short term? Or how you think the Mips safety will develop compared to Car now here in the coming 1- to 3-year period?

No, I think, I mean, there is no reason why we shouldn't have the two brands in the helmet. Short term, of course, I don't know what you mean with short term. But I think within a reasonable period like maybe a year, you will probably see combined solutions of the two also in safety helmet.

And could you possibly maybe give us a figure on what the average selling price for that helmet will be?

No, I can't. But I think, I mean, if you combine two great products, of course, we have our technology, which we have a license fee. And of course, that we will continue to charge and KOROYD also have a great product, and they also have a license fee. So it will be a combination of the two.

Yes. Okay. Great. And sorry, maybe lastly, the founder, John Lloyd, will he stay with the company for -- or how will the transition go?

Yes. So at the moment, he is part of the management team and so on and will support the business going forward. And of course, he is very keen on staying and making sure that he can deliver the earn-out.

To the management team for any written questions.

Yes. So the first question is, are you considering further ingredient brand acquisition opportunities in impact protection? If so, who would you consider as businesses of interest? I think we have looked at a lot of different acquisition opportunities. There is a lot of companies for sale out there. We don't buy companies just because they are for sale. We are really interesting in the companies with the great and best products. I think we really have a very good fit when it comes to that in the KOROYD. Business, of course. And then, of course, if it can also complement our strategy in the way it does, then, of course, ticking all the boxes, like I explained on my summary slide, there are not a lot of companies that actually do that. So I think it's a very complementary acquisition to what we have today. And of course, we are constantly looking for new opportunities. But I think also the focus for us is organic growth. And then we just partner up with a great company. Let's make sure we do that well first. Then, of course, when does the most important patent expire? Of course, when it comes to the KOROYD portfolio, of course, they have a big product portfolio. And like I said, there is application patents, which is for specific solutions. So if you look at what they are selling today, mainly around 2033 until 2040. Then the overlap between the customers, I think we spoke a bit a little bit of. And then can you provide any more detail on the credit facility element of this transaction, the quantum of credit facility? So as we said, we have a revolving facility. Today, Mips has SEK 280 million in cash on the balance sheet. So of course, we have quite a big proportion of cash. And of course, we will utilize that in the most capital-efficient way. If there is a need to call for more of the revolving facility, then, of course, there is two really good and strong cash-generating units in both Mips and KOROYD. So of course, that will also generate cash as we go. Do you think that KOROYD's growth in safety will limit Mips potential in the category given the available cost structure for each helmet? No, I don't. I think there is as big opportunity as before. Sometimes you will have solutions or helmets with Mips, sometimes only with KOROYD. And I hope, in most cases, a combination of the two. And then when it comes to assessing the size of the market for KOROYD comparable to our own TAM, I think it all depends on which market you are going for. And of course, as KOROYD is a premium solution on the market today, of course, you have a smaller addressable area because, of course, they have offered their product to premium solutions today or premium helmets today. So of course, that restricts a bit of the market. We don't have an exact number for that, but of course, it's a smaller size versus Mips because of the customer offering that they have. And then, of course, when it comes to what is the size of the body protection market, of course, you don't measure the body protection market in volume because, of course, you have so many different applications when it comes to body protection. First of all, you have what we mostly see, which is the whole area of sports where you are having that in bicycling, you are having that in skiing. Then, of course, you also have it in motorcycle. But the biggest area is actually the safety market. So it's very difficult to compare the two markets because they have a very different structure. And then, of course, the last question that we got, will there be any integration or fusion between the KOROYD and the Mips teams? So at the moment, like I said, we are planning to run the companies separately. I hope that we can learn and collaborate a lot from each other, but there is no plan at the moment to integrate the two different functions or different companies together today. Mips is operating out of Sweden and of course, KOROYD is operating out of Monaco. They have done it extremely successful. That's why we are having the discussion today, and we really want to leverage that and really utilize the best of both companies. With that, I think we have answered all the questions that we have on the call. If there is any more questions, of course, you're always welcome to contact us. Thank you, everyone, for listening in, and we are really excited about this acquisition and have a nice weekend.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.