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

Good day, and thank you for standing by. Welcome to the Mips Interim Report Q2 2026 Webcast and Conference Call. At this time, all participants are in a listen-only mode. [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. Good morning, everyone. My name is Max Strandwitz and I am the CEO of Mips. And with me today, we also have our CFO, Karin Rosenthal. And we will take you through the interim report of the second quarter 2026. So if we start with the quarter, we did see strong development with 72% growth in the quarter. Organic growth was 42%. So we adjust for ForEx, which was more or less flat. And then, of course, we also adjust for acquisition effects. So very strong organic growth. Year-to-date growth is now at 53% and organic growth level at 35%. We do see strong momentum in all categories and all geographies. Continued strong performance in Europe. U.S. growth helped by the acquisition and softer comparators after the implementation of tariffs last year. If we start with Europe, we did see strong organic growth with 48% growth in the quarter. And if we look at the U.S. market, we actually managed to deliver a 32% organic growth. So a very, very strong number in a challenging market. The Koroyd acquisition is developing well, good interest from existing and new customers to integrate new products. We did reach a settlement agreement regarding the legal dispute in the U.S. It was actually not in the quarter. It was signed on 2nd of July, but a very important factor. So good to put that behind us. We did see good improvement also in profitability adjusted EBIT margin in the quarter was 47%. So also very strong development in profitability and it's also a strong testimony of our scalable business model. And we remain confident in our long-term strategy and our financial targets. If we start with the biggest category and look at sports, we saw good development. It was a good quarter with 51% net sales growth in sport. Adjusting for acquisition and ForEx organic growth was 40%. We saw good development continuing in the European market, especially in bike, but also good performance in snow. And then, of course, positive development also in the softer U.S. market. Asia is actually start coming back after a softer period. We had a small growth number in Q1. with 6%. And then in Q2, we see 80% growth in the Asian market, although from quite small numbers, but still really good to see the development also in the Asian market. The strong performance in bike continues with volume growth for the 11th quarter in a row, which is not a given in the bike industry. Good season in the snow subcategory driven by European market. Europe didn't have a fantastic snow season from a weather point of view, but the snow came very early and especially in connection with a very important Christmas sales. We actually did see good sales growth also in the North American market in snow. But of course, it was also helped by a bit of softer prior year comparator relating to tariffs. We see strong interest in both Mips and Koroyd, and we are long-term positive about the outlook in the sports category. In Moto, we saw continued growth. We saw good performance with 80% growth in the quarter. If we adjust for acquisitions and ForEx, net sales grew with 56% and. Year-to-date growth is now at 49% and organic growth up 28%. Off-road and especially Motocross are still the main driver, but encouraging to see that the hard work that we have done on on-road is also showing a positive effect. We continue to roll out new innovations and new launches in Moto and actually look forward to really exciting end of 2026. And also here, no change in the long-term outlook, good opportunity to continue to grow in the category. In safety, we see that the Koroyd acquisition accelerates the growth in safety really big increase in momentum after the Koroyd acquisition. Net sales growth was 64%. And if we adjust for acquisition effect, our organic growth number was 80%. We did also announce entry into firefighting elements with the world-known brand Dräger. Which is a very strong brand in fire and safety equipment, and it also feels great to, of course, being able to go into a professional workforce that risk their lives every day. We do see good interest from new and current customers in Mips' and Koroyd's portfolio which now also includes body protection, gloves and footwear. And we remain excited about the opportunity in the category and no change to the long-term outlook in this category, too. If we look a bit more in detail about the development in the different categories, if we start with sports, we saw a good performance in all the 3 subsegments, which is bike now and question 1% growth in the quarter, 40% organic growth. If we look at Moto, like I said, very much driven by the strong performance in Off-Road but happy also about the development also in road. And if we look at the growth, we did deliver 80% growth in the quarter, and organic growth was 56%. And then, of course, with Koroyd, our relevance and size, of course, in the safety category changes quite a lot. We did have SEK 33 million in net sales in the quarter. Which actually equates to 15% of the total sales of Mips. If we look at the growth of the category as such in Q2, we did grow with 600% and organic growth was 80%. Then hand over to Karin.

Good morning. I'm Karin Rosenthal, CFO of Mips, and I will take you through the financial part of the presentation. We saw good development in the second quarter with an increase in net sales of 72% and. The Koroyd acquisition contributed with 30% growth and no FX impact in the quarter versus last year, so net sales increased 42% organically. Gross profit increased by 71% with a gross margin of 74.1% versus 74.2% last year. Good underlying improvement in profitability. Adjusted EBIT increased by 98% with an adjusted EBIT margin of 46.7% versus 40.4% last year. OpEx was impacted by legal costs of SEK 12 million versus SEK 14 million last year and SEK 1 million in transaction costs, which was adjusted. The legal settlement amount of USD 3.25 million will affect the third quarter. And we also had good operating cash flow in the quarter of SEK 62 million versus SEK 18 million last year. So looking at the financial KPIs. Organic growth of 42%, adjusted EBIT margin of 47% and operating cash flow of SEK 62 million in the quarter. If we then look at the development for the first 6 months, good development with an increase in net sales of 53% and Koroyd contributed with 24% growth and adjusting for that and the negative FX effect of 7% due to stronger SEK versus U.S. dollar, net sales increased 35% organically. Gross profit increased by 52%, and we had a gross margin of 72.9% and versus 73.2% last year. Good underlying improvement in profitability. Adjusted EBIT increased with 80% and with an adjusted EBIT margin of 41.4% versus 35.1% last year. In OpEx, we continue to invest in R&D and marketing. OpEx was impacted by legal cost of SEK 12 million versus SEK 23 million last year, which was adjusted. Operating cash flow of SEK 80 million for the last -- first 6 months. And financial KPIs, organic growth, 35%; 41% EBIT margin and SEK 80 million in operating cash flow. If we then look at the balance sheet and cash flow, we had cash and cash equivalents of SEK 187 million. We did a dividend payout of SEK 66 million in April, corresponding to SEK 2.5 per share. Since the acquisition of Koroyd last year, we now have a revolving credit facility and the utilization of that end of -- is SEK 300 million end of June. And operating cash flow in the quarter amounted to SEK 62 million. Over to you, Max.

Thank you. So if we then summarize the quarter, we did see good development with 72% net sales growth in the quarter, 42% organic year-to-date now at 53% with 35% organic. We did see good growth in all the categories in all regions. Strong performance in Europe continues, and we expect that to continue throughout the year. North America has surprised us a little bit how strong it is. It continues to develop well and also good to see that Asia coming back after a softer period. We are happy about the integration of Koroyd and that's developing well. We see a lot of interest from our existing and new customers, of course, for the newly acquired portfolio. Good underlying improvement in profitability. Adjusted EBIT margin in the quarter was 47%. So we are closing in on our ambition of maintaining an EBIT margin of above 50%. Legal dispute in the U.S. now closed through the settlement, favorable outcome for Mips. And important to notice that the costs relating to the settlement will be expected in Q3 and we remain positive on our long-term outlook and the delivery of our financial targets. And with that, we open up for questions. So over to you, operator.

[Operator Instructions] And this question comes from the line of Emanuel Jansson from Danske Bank.

Good day, Max and Karin. First of all, congratulations on a very strong report. And starting with the market environment and especially the U.S. market, as you mentioned, could you give us a sense of where we are right now? Are we seeing signs of growth returning in the market? And are there any particular price segments that are performing better than others, for example, premium versus lower end products.

Yes, it's very difficult to say. If you look at the market data, , it seems to have flattened out. So we don't see a decline anymore, more flattish number. Some markets or segments are actually growing because, of course, you have an element of price. But if we talk volume on the market, it seems to have flattened out. So basically around 0. And if we look at the different segments, we still see -- and this is something that surprises us all the time is how strong the premium segment is on the market. So if you can come with great innovations, there is a lot of consumers that are still prepared to buy. We also see a big opportunity in the lower price segment, especially also now when there has been some inflation on the market, we see that the lower price points are coming up. And of course, that increases also our ability to get into helmets also at lower price points. So of course, with inflation, also the possibility for Mips to integrate Mips solution into more helmets increases. I think the weakest segment is probably the mix segment. And like I said, it seems to have flattened out. There is some early indications for the ones that are following reporting of other brands. You saw that Giant in May reported growth of, I think it was mid-single digit and then actually up to have turned around and start growing again. I think everyone that has been in bike for a couple of years has been very keen to say now it's over. Now it's easy again. I don't want to say that. Our assumption is that if the market is flat, we will still be able to grow we are betting on a flat market for the rest of this year if we are helped by the market, fantastic, but I don't want to take that into our assumption. Because we have been disappointed too many times when it comes to the bike market.

Perfect. And do I understand you correctly that also looking at the inventory levels that they are still on a very low -- on the low end in the U.S. especially?

Yes. If you look at the inventory level and you take the last 4 years is the lowest in those 4 years. And if you take historic levels and then we go back to 2002, sorry, then they are actually the lowest that they ever have been. So yes, it is lower levels when it comes to our products, of course. When it comes to bicycles and others, then of course, you still see some inventory at some segment, especially the ones that haven't done any innovations and so on days have difficulties to churn that products into sales and so on. But overall, low inventory level.

I see. So several different ways for you to grow going forward then? And also, it was very encouraging to see the safety bouncing back with strong organic sales. Could you elaborate a bit on what is driving the development? You mentioned earlier the launch of the full brim helmet models into the market. How important has that been? And are there potentially any other factors behind the strong improvement?

No. I mean, we see good development on the base assortment that we already have. But of course, when we add the full brim helmets, even though it's early days, of course, we do that without any comparators because it's product expansion into new categories and so on. So the main driver of the acceleration of growth is the rollout of the full brim helmet, which seems to be very well accepted on the market.

Perfect. And then on Koroyd, that also seems to be developing nicely, which part of its business segments are currently standing out, you believe. And looking at the group gross margin, I think it appears that Koroyd as well is moving around 70% gross margin. Is that the right way to think about it? And what you think about the margin profile going forward on the gross margin?

Yes. So if we start with the segment, we see very good development in the safety segment for Koroyd. And also, we saw good development in the quarter for snow. So within the snow market. So really positive development there. When it comes to gross margin, of course, Koroyd has a little bit lower gross margin than Mips has. Our ambition is, of course, to achieve a gross margin according to our financial model, which is to stay above 70%, and that's what I believe we can do.

Perfect. And looking ahead then, how should we think about the comparable base heading into Q3? It may not be as easy as in Q2, but would you still describe it as relatively manageable rather than particular demanding going forward given the tariff situation last year?

Yes, I think we had 18% or 19% growth comparator in prior year. There was some overhang effects from the tariffs and so on. So I would say decent comparators and so on. Our ambition, of course, has not changed. We have said that our ambition and also in line with our financial targets is that we want to grow with a little bit more than 30%. We are a little bit ahead of that plan so far. But over 30% is what we really try to achieve.

And did you see any pickup in sales demand during the quarter? Was it stronger in the beginning of the quarter? Or was it even throughout the quarter?

Now it was quite even. We saw quite good momentum throughout the whole quarter. Of course, Q2 is important to note that it's snow quarter historically with main part of the sports sales is in snow helmets, but we also saw very good development when it comes to let both in the U.S. but also in the important European market.

Perfect. And finally, on profitability then. I mean on a rolling 12-month basis, you are basically at 42% EBIT margin which is more or less in line what the full year expectations from consensus are at the moment? How close to 50% you think you could realistically get already this year?

Yes. I mean we -- I don't think we will get to 50% this year. Our ambition is, of course, to get there. There is, of course, months where we go above 50% and various months where we are below. This quarter was a very strong quarter with 47%. A lot of investors think that we have lost our scalability. And of course, I think this is a clear testimony that we haven't. With growth comes our improvement in underlying profitability. That has not changed. When it comes to our financing model, the most important thing is, of course, the gross margin. Then we have a very scalable business model. And of course, when those 2 work well together, you get very high profitability. We have had the smallest quarter behind us, which is Q1, where we normally have a little bit less profitability. And then we have a bit 2 bigger quarters ahead of us, but I think it's too much of a stretch to go for 50% for the full year.

Totally understand, but it's likely to expect increments if you are continuing to grow then -- thank you very much, Max and Karin, that was all of me for now.

We are now going to move to our next question. And this question comes from the line of Adela Dashian from Jefferies.

Congratulations, Max and Karin from me as well. A couple of questions. If I may start with the continuation on the profitability question as before. I was under the impression that Koroyd would be margin dilutive in the near term, but in Q2, you obviously show momentum with both gross margin and EBIT margin expansion. So can you just maybe again explain a bit further. Is this more or less driven by legacy mix or is there anything in Koroyd you're already today starting to see the early signs of improvement?

No. I think important to point out that with Mips you have a very successful and profitable business. With Koroyd, we have a very successful and profitable business. Of course, if you would isolate Mips alone in the quarter, you would have an even higher EBIT margin. So of course, the 47% that you see in this quarter is a combination of the 2 with Mips having a higher EBIT margin and Koroyd having a little bit lower, but it is still very -- 2 very profitable companies. When we look at acquisition targets, there is a lot of different things that we are looking at. We always start with the superior product. I believe that the one that has the best product will win. Then, of course, you look at other things like global reach, global brand, scalable business model and so on. And Koroyd can, of course, tick a lot of those boxes and so on. So it is a very profitable business, but not to the extent of Mips.

That's good to hear. And then maybe if I'm not mistaken, Q3 tends to be a pretty heavy trade fair quarter for you. Is that correct? So should we expect that to burden your expense base to some extent?

No, there is -- normally it would be, I agree. This year, there is only 1 trade fair in September, which is NSE, which is fair within safety. Eurobike was a bit earlier, but it has become a very small fair. So it was actually in end of June. So no, I don't think you should be worried about trade fair expenses in Q3.

Okay. That's solid. So I guess the level that you reached already in Q2, there's no reason to not expect us as long as you have at least 30% organic growth in Q3. There's nothing that is stopping or not be able to deliver that in the second half as well.

You will always have a little bit of swings between the different cost lines. If you look at R&D expenses, of course, we are investing heavily. That's normally -- or that's a little bit higher than we have as a long-term ambition of 5%. And if you look at marketing expenses, we are a little bit lower than the long-term ambition of 7%. So you will have swings of 1% or 2% between the quarter. But there is nothing extraordinary in Q2, and I don't see anything extraordinary in Q3. But bear in mind that we will recognize the settlement of the legal dispute in the U.S. in Q3. But adjusted, no, there is nothing that will stand out.

Okay. And then good traction in safety. You've previously guided for doubling every 6 to 12 months. Does that still hold now with Koroyd in the mix.