Nimbus Group AB (Publ) (BOAT) Earnings Call Transcript & Summary

Okay. A warm welcome to this event and I don't actually see what you see. So -- and hopefully, you see one of our lovely coupes, the 365 coupe on the Page 1, and I then suggest that we flip the page to Page 3. And then we start with some highlights then of the second quarter of '21 then. We had, as you probably know then, sales increased by roughly 36%. So we reached SEK 6 million. The sales was then to a large extent by our own dealers. So we had 61% versus 41% earlier. The EBITA amounted then to SEK 113 million, and the margin was up to 17.3% per month. And after all these deliveries then, during the quarter 2, quarter 2 is our best quarter normally. We still then have a order backlog of SEK 731 million compared then to SEK 854 million in the first quarter, but please keep in mind then that we do a lot of deliveries during the quarter 2. So this is actually on a very strong order book, but we will come back to that. The capacity restrictions are obvious, of course, and we have then done some initiatives during the spring and also during the summer. And actually, it's planning for and also have done some investments in our production units, both in Sweden, Finland and Poland. And then good news, and of course, in May, we bought the Swedish dealer network Marine Store. And if we flip the page to Page #4, which we are very happy for, they are located in a very interesting boating district, and it's actually in that way that we have no representation before in this district. So we are very happy with that. They are located around Stockholm. So it's the Swedish East Coast we are talking about. And of course, then a lot of boating as it is in the Stockholm area in general. 21 employees. They had a net sales in 2020 of roughly SEK 330 million. And they are well reputed and actually then obviously the largest dealer in Sweden. And one good thing then for us, of course, is that today they don't have any Nimbus sales at all. None of the Nimbus group brands. And of course, we are planning then to add to the present brand to add our brands in the future then, of course, that will of course have a good effort on the business. And the purchase price then was SEK 180 million. And then of course, we have paid some additional money for the cash, but of course, we did on a net debt [indiscernible] level that we are buying them. We had a net cash flow effect then of SEK 105 million during the quarter because of this acquisition. They have already now added actually then SEK 91 million to our net sales, which is of course very good. And it's about 20% of the sales in Sweden. And already mentioned, the potential then, of course, in the margin improvement when we then add our own brands to the present brands that they sell. Preliminary goodwill identified then to SEK 177 million. If we then flip the page and then we will look back a little bit to Page #7 and -- sorry, Page #5. And this is then actually what we used in the IPO that we did in this year, February of this year. And this is then why invest in Nimbus and we call it here as a reminder. And one of the important thing is, of course, that we have a strong underlying market, and we have done also several, as we say here, fundamental drivers, and I will actually then come back to that later on. We have our true house of brands with a strong and distinctive brand portfolio. And already here, I mentioned that this is then of course for the dealer. We want to be an important part of the dealers business. We are in attractive position in the value chain. We see a lot of opportunities. I will mention that also a little bit later. We have our asset-light and flexible production. It's about scaling up and scaling down in an efficient way. Experienced management team, definitely and then last but not least, excellent growth opportunities, including then the geographical expansion. And then we're talking mainly about North America for the moment. And then also consolidation, both vertical and horizontal. And then it is like that, that we are working in a very fragmented industry. It's a lot of [indiscernible] that gives us then, of course, a lot of opportunities for ourselves, but it's also like that, that the industry must have a consolidation. If we then flip to Page 6, short about the Nimbus Group, we were founded in 1968 and we have a very long history of international trade. It's actually more or less immediate at that time that it started with international trade and that was due of course to the fact that the [indiscernible]. We have our well-known Scandinavian brands, all 7 of them, and it's actually that a couple of them is also globally -- have a very high brand awareness. 2012, we were, you can say, we reconstructed by our new owner and still our major owners R12. So they are for long term. 2018, we can in a way say that we proved the fact that we are a house of brands. At that stage we only had 2 brands. And then we acquired Alukin. And then in 2019, we acquired Bella [indiscernible] and Bella [indiscernible] then added 4 good brands to our portfolio. In February, as I mentioned before, we were listed on the NASDAQ First North. And again, then the proof that we won something with this journey is that we then bought Marine Stores in May this year. Back then a little bit to what we said from the beginning, I already said that we want to have this house of brands for the dealers' sake. It's important for us to be a big part of the dealers business. And it's also like that to be able to be that we need a couple of brands. We need to be present in a couple of segments that fits the current boating that the dealer has around the [indiscernible], but it is interesting [indiscernible]. In the middle, you have this -- the share of the group new boat sales then. This is [indiscernible] from 2020. But you can say, in general, the portion is quite accurate. What you can see is that Alukin starts from a quite low level, but that they're doing very well, so they are growing. And -- but mainly, you can say that the portion is more or less the same. These fundamental drivers, this is, of course, really interesting. We have had a technical development and important to mention, I think, is that it's both in industry sales that develops the products, which means that we are focusing on [indiscernible] journey when you're out there. And this is good because for the new boat sales because if you compare a boat that is a couple of years old, it's quite a huge difference today between the technical level on that one and also the one that we actually produced to data. We also have an aging boat fleet -- and usually, I'd say that if you look at Sweden, for example, in 2020, 45% obviously was actually older than 20 years. And this is, of course, also something that needs to be updated. We have the increased popularity of staycation. And here, I also want to point out that the pandemic has, of course, accelerated the trend, no doubt. But these staycation trends started well before the pandemic. And if you combine that with that fact, the last one, the overall wealth is increasing, we are working a lot, but then we also want to have a high quality in our spare time. And we are actually then also prepared to pay for it. And if you combine these 2 things, this is, of course, good for the recreational industry, but also of course for us because we are a part of that. So that was the fundamental drivers then. If we then flip to Page #8, a little bit about the production. On the left hand, you can see where we're present today. And actually, the biggest one is the outsourced one that we have in Poland. 400 employees, we have increased quite a lot of people in our own factories. And of course, we have also increased the outsourced units. In the middle, this is more or less a philosophy from our part. We want to have a very high portion of the cost as variable cost. Actually, we are saying that at least 75% of our cost should be variable on 6 months -- this is one very important [indiscernible], it's about scaling up and scaling down. Production efficiency is important. We have done a couple of launches a couple of years back, for example, the new [indiscernible] areas, where we've worked a lot to have actually done one platform, one technical platform for a lot of different models. And this is, of course, then it's not only the program, it's also the process that we [indiscernible]. If we then flip the page -- and then we have Page #9, our order book. And as we say there, it's actually a record high for this time of the year. And as I said, it increased, of course, from the last quarter. But then again, if we compare this quarter 2 '21 with quarter 2 '20, you can see that it's almost 3x as high and as it was there. And then, of course, we had some pandemic in second quarter '20, that affected the order book, of course, but still it's a good development, no doubt. Then I actually leave the word to Rasmus.

Yes. Thank you, Erik, and I will just start mentioning that prepayments is, as you can see, it's 14% and it's somewhat down compared to what we had in the last quarter, but that's because of -- that we see now that we have a very long order -- long-term order book where only the initial prepayment has been invoiced. So that's logic. And we also see that this will normalize going forward. If we flip to Page #10, then we see that sales in the second quarter has increased by 36% to SEK 657 million compared to last year. And the LTM sales amounts to SEK 1,255 million, which is an increase by 22% compared to full year 2020 and plus 16% compared with the last quarter's LTM figures. Regarding the demand, we see growth in America and the Nordics, including Sweden develops well. In the quarter, 60% of the sales comes from own dealers compared to 40% last year. And here, we see a positive effect from Marine Stores, as mentioned before, with SEK 91 million. Also worth mentioning is that the second quarter is a strong quarter in Sweden and because of the seasonality in that we have several own held dealers in Sweden. Therefore, the Swedish market is strong in the second quarter. It's the strongest quarter. If we flip Page #11, please. EBITA margin continues to improve and now amounts to 9.6% on an LTM basis compared to 7.8% in the last quarter. The increased margins comes from higher sales volumes that gives scale advantages on mostly OpEx, but also somewhat increased gross margins. Worth mentioning is that the Marine Store only has contributed to the dealer sales margin, so no manufacturing margin at this stage. In the quarter, the EBITA results increased by 47% and now amounts to SEK 130 million compared to last year. If we turn to Page 12, please. Working capital, we see that we now have a negative net working capital as per the second quarter that amounts to minus SEK 32 million. And the reason for this is mainly due to stock levels, but also that both -- but also the acquisition of Marine Store where we acquired both cash and the trade payables. And as per the second quarter, these trade payables were not yet fully paid. This will be normalized going forward. And we can expect that net working capital will therefore rise a bit. But also when excluding Marine Store, we see that net working capital is very -- on a very low level compared with the previous periods, which we are very satisfied with. If we flip to Page 13. This is to remind about our financial targets and compared to -- compared with our actual figures. First, the growth. We have said that we should have an organic growth of plus 10% -- business cycle. And that includes acquisitions of dealers but not brands. And year-to-date, the organic growth is 37%. And EBITA margin, we have said that we should reach 10% on the medium term. And now the actual LTM figure is 9.6%. And regarding the capital structure, we have said that we should have no senior debt, which we don't now as per the second quarter. We have also said that we have also a dividend policy saying that we should pay out 30% of the results, taking into account financial position of the company and cash flow. This is not a financial target that we measure today. Of course, this will be in year-end question. So I hand over again to Jan-Erik on Page #14.

Okay. Thank you. So as you say then, an exciting journey ahead. And what we then will -- we should not say focus on that, but we spend a lot of time on at least is then, of course, to develop our current offering and organization. We will continue then to expand and densify the dealership network in Europe and then especially, as we mentioned the Aquador and Flipper brand, which has actually never been there. We will also then improve the aftermarket offering in presence, of course, increase the presence in North America. And I think I mentioned also the last time that the North America actually is our second biggest market after the home market already now. So that is, of course, good for us, it gives a lot of energy. And then as we more or less proved with the acquisition of Marine Store, that's value acquisitions and again, the Marine Store forward integration. So that is what we see in this journey. Then I'll leave the word to Gunilla.

Yes. So next page, the ownership end of July is pretty stable from the spring and the IPO in February. There are some increases by #7, OP Fonder but more or less the same since earlier. So with that, we open up for questions, and I just want to remind you that our Q3 report will be on November 23. So welcome for questions.

[Operator Instructions] The first question comes from Gustav Osterberg from Carnegie.

And congratulations on a great Q2 report. I have 3 questions. The first one is on sales mix here in Q2 2021. You were talking about the improved margins. You mentioned a better gross margin as well as volume leverage on OpEx. But is there some mix as well in the quarter. I mean is there a higher share of larger boats in Q2 '21 compared to Q2 earlier years?

Well, actually, we don't really see such difference because the market is strong on both smaller boats and larger boats in the second quarter. So in terms of mix, I would say that it is a fairly stable mix compared to full year picture.

So most of that improvement in the margin is driven by the production side essentially?

That's correct.

And secondly, on the order book and the reported sales in Q2, are there -- or all sales that is reported in Q2 from the order book? Or are there some part of that sales that is not taken from the order book?

I would say that almost all the sales comes from the order book. But of course, there might be some smaller boats at dealers that can have been directly over desk. Then, of course, it's aftermarket sales that you don't know and you don't have any order books as you say starts. But that is -- the major part is, of course, both this quarter.

And then a final question on North America. How -- could you please give us a bit more color on what's driving that sales increase? Is it more or new dealerships being opened? Or is it increases in volumes on existing dealerships? And perhaps if you could give some more color on how COVID-19 is impacting kind of that expansion and plans going forward? Are you seeing any easing restrictions, et cetera.

To begin, we've seen clearly that the current dealers is adding orders. So obviously, that they are selling good. We have added a couple of dealers. But as we say in the report, we have [indiscernible] change, but we have a couple of dealers that want to sell our products that we cannot start with them because we don't have enough available boats, so then we'll get this fall start as I'm talking about. So we have to do it in balance with the production capacity. As we have started 2 during this quarter, so we added 2, and then, of course, they have awarded some [indiscernible] boats, but mainly it's because of the fact that they are selling more [indiscernible]. And then the COVID, similar picture, I should say, as we see, of course, it's hard to predict anything, but that's COVID [indiscernible]. It's the same more or less in the U.S. They spend their money on things they can do close to the home, so to say, and that includes boating, of course. And then if we see North America compared to Europe, Europe, we had a complete lockdown. They have had that really U.S. Some states, they have added, but we were not affected in that way because it was [indiscernible] typical boating. So it's a similar picture as we have in the Nordic. I hope that answers your question.

The next question comes from Victor Hansen from Nordea.

I'll start off with if you could provide a comment on what component issues you are seeing, perhaps if you had any trouble in the supply chain or in terms of higher input costs and if you've raised any prices.

If we start with the last one, we increased the prices. We haven't ever done that before, but we actually did that just before the summer, depending on what model, of course, but you can say, in general, 4% to 5% because this -- at that stage that we have the increases [indiscernible]. If we look at the picture in general, we don't see anything specific. It's more or less this general picture that you have to plan your production well ahead, and we are quite used to that. I think we differ a little bit from, let's say, the smaller ones than [indiscernible] production planning. So what we have seen is, of course, some delays, but it has really affected the end customer because we have this well advanced. We also have work to a greater extent with the inventory where we have secured more of things that we see that we don't have this perfect situation, you can say, just in time deliveries. It's more that [indiscernible] so nothing specific. Then of course, the engine makers, they have had the problems but it's same with the team in [indiscernible] same there, if you can, whether [indiscernible] with the present situation.

And then a follow-up on your North American expansion, if you could help us with what are your delivery times now in the NA and how does it differ compared to the Nordic and the European markets?

You mean in our delivery time to North America or in North America, so a say, from dealer to end customer or?

Yes. So from when you get the order to when you deliver the boat.

That's a good question. First, to start with, maybe we can mention that it is a bit different depending on models, of course, demand of different models. Some of the models we sell in the U.S., which are popular there. Today it has a longer delivery time than what we see on some other models. So that's one thing to consider. I should say, this is not -- we haven't checked the facts behind it, but it really doesn't differ between North America and Europe. But you have -- again, you have to plan your business. The dealers in U.S, they work slightly different from the European because in Europe, the dealer typically has an order from the end customer and then he orders the boat. In U.S., they like to have a stock. So they are more adding batches when they're putting their order to us. But the delivery timing is more or less the same. And again, exactly as Rasmus said, depending on which model, of course. But if you buy some of the more popular ones today, then of course, the delivery time will be somewhere around the summer next year.

When will you have had the time to integrate and start selling your own brands for Marine Store?

Well, to begin with, we want to add our brands then because we will certainly not sell all the brands in the Marine Store because they have [indiscernible] converting, but they have a couple of brands that we think that we fit perfectly. And we will start that during 2022. But again, the capacity then. So we will not have a full house during 2022. It will more likely be in 2023 as we will start marketing [indiscernible] during next year.

But it's important to understand that we will continue to sell brands that we sell today at the Marine Store also. So we will add, as Jan-Erik mentioned, more brands to the Marine Store.

And then if you could tell us how much Marine Store benefited your EBITA in Q2. I only saw sales in your report.

We have not communicated that figure actually, so in the report. So what we have only communicated is the sales -- net sales figure.

Then perhaps you could tell us the seasonal variation in terms of sales and if the margin -- how the margin varies by season.

The margin over a seasonality perspective is fair -- I think you're talking about the gross margin, then we say it's fairly stable on the 12-month period. What difference is, of course, the volumes when the dealers delivers a lot many boats because of the seasonality. So in that term, of course, the EBITA margin is affected since we now deliver more boats in the second quarter. I'm not sure if that was -- answered to your question.

So you also get some scalability on OpEx in Marine Store then?

Absolutely, yes, for sure. It's the same as we have -- this is effectively the same as we have at our other dealers. It will be the same because the revenue comes from the open season from, let's say, April to August or so, which is the normal period in Sweden.

We can say what affects the margin in the [indiscernible] that they are selling -- the typical dealer in Sweden, for example, or in the Nordic countries. They are selling used boats to a greater extent at the end of their season, July, August compared to the new boats because the new boats delivered a little bit earlier. But still, that's the normal picture in this year we have today, we produce boats today that we actually [indiscernible] in Sweden -- that is not [indiscernible].

And a final question, and this is just to clarify. You talked about your expansion plans in terms of production. And do you pay any CapEx to increase the production volumes within your outsourced production, such as in Poland?

No, we don't.

[Operator Instructions] We have no further questions, so I will pass back for any closing comments.

So let's -- Jan-Erik, say thank you for today.

Yes. Thank you. Thank you all.

And welcome back in the third quarter.

Yes.