Pierce Group AB (publ) ($PIERCE)

Welcome to Pierce Group Q1 Report 2026 presentation. [Operator Instructions] Now I will hand the conference over to the speaker, CEO, Göran Dahlin; and CFO, Fredrik Kjellgren. Please go ahead.

Good morning, everyone, and welcome to Pierce Group's presentation of our Q1 results for 2026. I'm Göran Dahlin, CEO of Pierce Group, and I'm with Fredrik Kjellgren, our CFO, and thank you for joining us today. Today, we will begin with a brief recap of who we are and where we stand in the European market, followed by a summary or recap of our transformation program, Pierce 2.0. Then we will go into a summary of our financial performance in the quarter, and then we will follow that with a look ahead to our outlook and growth drivers for the coming quarters, and we'll close with a Q&A session. So we are Europe's #1 online destination for motorcycle gear and equipment. Pierce was literally founded in a garage in 2008 by two Motocross enthusiasts. The company has been successful and growing for a long period and developed into European leading e-commerce platform for motorcycle, snowmobile, gear, parts and accessories. Post COVID, there was a tough period, but we are now back to growth and back to profitability. We operate the online stores 24MX, XLMOTO and Sledstore. And 60% of our turnover is done with Offroad riders, 35% with Onroad riders and 5% with snowmobile riders, while Onroad is 90% of the total market. That means that we have a very strong position in Offroad, while we have a challenger position in Onroad. We aim to grow in all our segments, but naturally, the largest growth opportunity is in Onroad. We operate locally adapted websites in 19 European countries, soon to be 28. And we turnover SEK 1.8 billion, and we report 3.2% EBIT last 12 months Q1 2026. We have approximately 280 employees spread over Stockholm, Szczecin in Poland and Barcelona and Pierce is listed on NASDAQ since 2021. We have the broadest and most differentiated product assortment in our industry, including one of the highest shares of private label. We offer more than 200,000 articles to more than 1 million customers across Europe. And we started in Sweden, but we're now a true and the only pan-European company in the industry with 70% of our turnover being done outside the Nordics. E-commerce penetration varies across Europe and remains higher in the Nordics and parts of Western Europe, while still lower in Southern and Eastern regions, creating room for continued online shift. Within our categories, e-commerce penetration is higher in Offroad and lower in Onroad, where the market is larger, but still more underpenetrated online. Overall, the niche is well suited for e-commerce, where we can offer superior selection and availability compared to physical stores. The rider base continues to grow long term and electrification, we believe will further broaden the customer base by lowering entry barriers with easier handling, less noise, lower maintenance and improved accessibility in urban environments. This will attract younger riders and new consumer segments. A word on our logistics because we have a truly unique logistics setup for our industry. We have one of the largest warehouses in our industry in centrally located in Europe, in Western Poland. We have 37,000 square meters, which provides ample room for growth. There we stock more than 60,000 articles, and we have a deep buffer capacity also, which is very important in our industry where the leading brands have limited logistic capability. This means that we, in a superior way, can serve our customers with 20,000 orders per day that we pick and pack within 24 hours. We also have a very efficient setup with Pierce dedicated long-distance haulers that both delivers to national injection points for last mile deliveries to our customers as well as pick up, refill and cross-dock orders from our suppliers. Looking at the competitive landscape, it's quite fragmented. It consists of 5 main segments. As you can see to the table to the right, we are one of the largest retailers in our industry, and we're also the only 2 pan-European specialists with local sites, language, payment options, customer service and delivery partners across our markets. Most other players are strong local champions focused on their home market, often primarily Onroad and generally with a relatively low private brand share. Several are financially owned, which could facilitate future consolidation. Overall, the market structure creates a clear opportunity to build a significantly larger pan-European category leader with a scale to stock a wider assortment, offer superior availability and delivery times as well as strengthening the private brand offer, improved purchasing power with key suppliers and also unlock very meaningful back-office synergies. So then I would like to spend some -- a couple of minutes on talking about Pierce 2.0. Pierce 2.0, that's our transformation journey. As I said, we started in a garage, was successful and fast-growing company. Following the COVID period, however, the business entered a more challenging phase. Declining demand, pressure on margins and substantial losses. I joined Pierce in Q2 2023. Shortly thereafter in Q3 2023, we launched Pierce 2.0 with two clear priorities: return to profitability and return to growth. The company was weighed down by a cost base that was too high. Decision-making was slow and cumbersome causing layers of hierarchy and unnecessary complexity. To address this, we initiated a major reorganization reset in Q3, Q4, 2023, simplifying the structure and significantly reducing the white-collar headcount. This was made possible by introducing a new more lean operating model with commercial teams, each responsible for a defined business area with real business ownership, empowered to make decisions and expected to move fast, take risk and learn for mistakes. At the same time, we took a hard look at our technology platform, and we concluded that the existing tech stack was not fit for purpose. It was underperforming, unstable and lacked the scalability required. And as a result, we made a tough decision to replace 4 of our core IT systems, including our warehouse management system and e-commerce platform. Again, this was a difficult decision. We knew it would be both costly and time consuming, but also absolutely necessary. We simply had no alternative. Alongside this, we evaluated our private label portfolio and concluded that sales were spread across too many small brands, making it difficult to invest effectively in brand building. Some brands also suffered from a weakened brand perception due to inconsistent product quality in the history and the lack of clear assortment and brand identity. We, therefore, simplified the portfolio from 73 brands, focusing on Raven and gear expanding into the large but highly competitive Onroad segment and Proworks and parts and accessory while we are keeping Course as a tactical brand. This has been quite an effort. We have migrated several thousands of products and replaced and launched several thousand new ones. We have partnered with leading designers to strengthen the overall brand and product offering. While private label growth has lately not matched the pace of external brands, we have taken the right strategic steps and remain confident that sales momentum will accelerate over time. We spent almost all 2024 cleaning up inventory through targeted sales activities for slow-moving goods and more restrictive buying. We also made a SEK 44 million write-down of obsolete inventory, mainly related to older stock that we judged could not be sold. This initially held back growth as we cleared out slow-moving inventory, but we began to recover once we rebuilt the assortment in Q4 2024, and we aim to take the position as a true specialist in our industry by building wider and deeper assortment than anyone else, combined with a very competitive delivery lead times. Since Q4 2024, sales has grown 16% despite the challenging market, clearly gaining market share. This growth, combined with a stepwise reduction in white-collar headcount amounting to 40% now versus Q2, 2023, has resulted in a 9% increase in sales for white-collar employee, demonstrating the efficiency gain of Pierce 2.0 program as well as the scalability of our business model. We reported an EBIT of minus SEK 69 million in 2023. Since then, we have turned the business around and have been profitable in all quarters except for setback in Q1, 2025. Adjusted EBIT improved to SEK 25 million in '24, SEK 45 million in '25. In the last 12 months, we have reached SEK 59 million. And this is despite transformation costs related to our IT stack, which was SEK 10 million in '24, SEK 29 million in '25 and SEK 36 million in the last 12 months, mainly related to the replacement of our core IT systems. And this is primarily external consultants and temporary double licensing during implementation that cannot be activated in the balance sheet. At the same time, the underlying business has strengthened. The customer base has grown, customer satisfaction and retention has improved and employee Net Promoter Score has increased significantly. And now we slowly approach the end of this program, and we are now moving into the next phase with a stronger platform and a more scalable operating model. We are in a position to expand into new markets and categories and explore consolidation opportunities in a fragmented market. Now we will walk through our Q1 financial performance. So we saw a strong improvement in adjusted EBIT during the quarter. In Q1, adjusted EBIT came in at SEK 2 million compared to minus SEK 11 million last year, and this is despite approximately SEK 6 million in temporary transformation-related costs. We should also say that we report SEK 6 million in EO costs this quarter, but this is not the transformation cost. It just happens to be the same amount. Looking at the last 12 months, adjusted EBIT reached SEK 59 million or 3.2% of net revenues, even while absorbing SEK 26 million of transformation costs. So we are stepwise moving in the right direction towards our midterm financial targets of an EBIT of 5% to 8%. On the top line, we continue to grow despite the challenging external environment. Q1 sales grew 5% year-over-year or 10% FX neutral, supported by improved stock availability and strong marketing execution. Over the last 12 months, FX-neutral growth was 14%. So weather conditions had, we believe, overall, a slightly negative effect over the quarter. Q1 is the most weather-sensitive quarter of all for us. In the Nordics, conditions was very supportive, particularly for Sledstore, while Europe experienced the coldest January and February in 16 years. And there, we don't have Sledstore. We only have 24MX and XLMOTO, and they were quite negatively affected in January and February. Encouragingly, weather condition improved in March, which helped demand to recover towards the end of the quarter. At the same time, the broader macro environment remains challenging. This goes without saying, with continued geopolitical uncertainty affecting consumer sentiment and despite this backdrop -- with this backdrop, we believe that we continue to take market share. Moving to our margins. Contribution margin, which is margin after direct cost remained stable year-over-year, supported by an improvement in marketing efficiency. Gross margin declined 1.3 percentage points, mainly due to higher competitiveness in the market. However, this was offset by better conversion and lower marketing spend as share of sales. Our focus remains clear, driving absolute contribution profit growth through maintaining healthy gross -- while maintaining healthy gross margin levels over time. We also continue to improve cost efficiency across the business. And despite continued growth and ongoing transformation activities, operating expenses decreased to 16.4% of sales, an improvement of 1.5 percentage points year-over-year, and this is primarily driven by the efficiencies from the Pierce 2.0 program. As mentioned earlier, Q1 still included around SEK 6 million of temporary transformation costs related to the rollout of the new IT stack. These costs will gradually phase out, creating a positive effect, EBIT effect, going forward through both lower transformation costs and lower depreciation and amortization. Part of the previously communicated expected SEK 30 million to SEK 40 million EBIT improvements post final system launches has already been realized. Remaining, we expect a further annualized EBIT step-up of approximately SEK 20 million to SEK 30 million once the 2 remaining large IT systems have been fully launched. And we expect that to happen during the first half year of 2026. So finally, we conclude to that we maintain a very solid financial position. At quarter end, cash amounted to SEK 273 million in addition to an available SEK 150 million credit facility. Inventory levels were broadly stable year-over-year, and we expect them to remain at these levels to support continued growth going forward. Looking into some of our KPIs. Private brand share over the last 12 months was 35% compared to 38% a year ago. The decline in share is mainly mix driven as external brands have grown strongly. In absolute terms, private brand sales remained solid. We launched a large number of new products in 2025 and ramp-up has been taken longer than expected. We continue to invest strategically in private label, and we have high ambitions to accelerate growth, but we also need to remain realistic about the time required to build new successful products and categories. At the same time, we're unlocking significant growth within our external brand portfolio by improving availability and assortment. This remains an important growth driver. As we know -- as we grow both private brand and external brand, we do not expect major structural shifts in private brand share long term. And to the right, we have Trustpilot, our Trustpilot scores, and we rank one of the highest in our industry. We have increased slightly from 4.3, 2 years ago to 4.4 and will remain at 4.4 in a stable manner. Looking at our customer base, one of our most important KPIs, of course. It's very satisfying to see that we continue to grow our customer base. And this is both because we managed to attract new customers, but we also managed to increase our customer retention. We also see a strong increase or a good increase in the number of orders, while average order value remains fairly stable over time and naturally affected by FX also. So I hereby hand over to Fredrik Kjellgren, our CFO.

Thank you, Göran. If we now zoom in a little bit on the gross and contribution profit margins. The gross profit and profit after variable cost increased year-over-year despite the very strong headwind that we had from FX translation. Contribution margin, that is the margin after variable costs, remained stable compared to last year and the profit increased in line with sales. During the period, the company had a high level of activities to support sales. This involved actively positioning our sales prices to support commercial activities. The activities put pressure on the gross margin. However, the commercial initiatives also drove increased competitiveness, thus reducing the need for performance marketing. In addition to the agile management of pricing and marketing, we drive initiatives to improve the efficiency of our performance marketing. So in total, the pressure on gross margin was offset by the improved marketing spend, resulting in a stable contribution margin. Looking ahead, we expect market to remain price sensitive. So our focus is on maximizing contribution profit in absolute terms, i.e., we aim to be price competitive, but not the cheapest in the market. Now let me give you some additional context to the adjusted EBIT this quarter. The Q1 adjusted EBIT increased from minus SEK 11 million in 2025 to positive SEK 2 million in 2026. But in order to fully capture the underlying trend, it's also good to be aware of the other unusual items impacting the adjusted EBIT. Göran has described the transformation journey of Pierce. The transformation involved implementation of new SaaS systems, overlapping license fees and costs related to external consultants. The transformation costs, which are not classified as items affecting comparability, impacted EBIT with around SEK 6 million in the quarter. Excluding these costs, the adjusted EBIT would have been approximately SEK 8 million for the quarter. The last 12 months Q1 adjusted EBIT increased from SEK 7 million in 2025 to SEK 59 million in Q1 2026. Applying the same logic with exclusion of unusual items related to transformation costs could bring the annual adjusted EBIT to SEK 85 million for the last 12 months. We expect the transformation costs to decline significantly once the new tech stack is fully implemented during the first half of this year. Overhead costs decreased by SEK 3 million year-over-year to SEK 69 million, and this was despite the SEK 6 million in transformation expenses that was included in the OpEx. Since Q3, 2023, we have rightsized the company by reducing our white-collared workforce by more than 40%, while increasing net revenue by 15%, resulting in roughly 90% higher sales per white-collar FTE. This demonstrates the scalability of our model and the efficiency gains of streamlining processes, empowering teams, reducing bureaucracy and empowering teams to make faster decisions. Looking at our net working capital and the development. Our net working capital has increased since the exceptionally low levels that we saw back in Q2, 2024. This is mainly the result of our efforts to strengthen the assortment and improve product availability, which are key enablers of growth. As of this quarter, the year-over-year development on net working capital has stabilized as we meet relevant comps. The improved net working capital in Q1 versus last year is primarily driven by improved inventory turns, but we also had a contributing factor from improved supplier payment terms as well. We still see opportunities of growth by further strengthening of the assortment and improving availability, but we expect pretty stable net working capital in relation to sales going forward as we balance strong availability with disciplined inventory management. Our focus remains on continuously improving our purchasing methodology to drive higher efficiency, keeping the stock fresh and healthy by acting early on slow-moving items while maintaining the right levels of inventory to support customer satisfaction and sales momentum. And with that, I hand it over back to you, Göran.

Thank you, Fredrik. So looking forward, looking ahead, we will continue executing on Pierce 2.0. We will strengthen our fundamentals by improving customer experience, streamlining operations and increased scalability. We target completion by the first half of 2026, after which the temporary overlap of systems will fade and profitability will structurally improve. At the same time, we are entering a new expansion phase. The rollout of 12 localized markets and continued growth in mountain bike and scooter moped categories has begun. It will broaden our addressable market, create cross-selling opportunities and add new revenue streams over time. This will take time to scale, but we will -- it will be an important contributor to long-term growth. And finally, our working direction is to participate in the consolidation of the European motorcycle market. The e-commerce market remains highly fragmented and is ripe for consolidation. The largest -- we are the largest and only pan-European listed player with a scalable platform already in place. So we are uniquely positioned to participate and potentially lead to the next phase of industry consolidation. And by that, we enter into Q&A.

[Operator Instructions] The next question comes from Adrian Elmlund from Nordea.

I have a few questions, please. So firstly, we note that there's SEK 6 million in item affecting comparability seemingly for consultancy costs. Could you give us some more explanations for these -- the thoughts behind these investments and basically what you expect to gain from it?

So as we write in the report, you're right, these are primarily consultancy costs related to the strategic project that we have undertaken. We have completed it in Q1. The purpose was to assess different avenues for growth. And this outcome may support future initiatives.

Right. Okay. You also mentioned in the report that you saw encouraging momentum in the new mountain bike and scooter moped categories. Do we have any kind of ballpark figures for what you expect this to drive in terms of, if you call it, incremental sales growth? Like are we talking tens of millions of SEK or is it like above SEK 100 million a year that is?

I would say it will take time to grow, so to scale. So to begin with, we should not have too high expectations. In the short, it's not in the hundreds of millions.

Right. Okay. Any effect we've seen in the war in Iran affecting, I don't know, freight costs or consumer spending habits or something that you've picked up on?

Yes. In some cases, yes. What we have seen primarily is that some of our suppliers have flagged for increased purchasing prices on plastics and other oil derivatives. So there, we have tried to put as much orders in -- as we dare to get the existing prices. And then we also see insurance cost on freight increasing, but that's a minor part of the total cost for freight. But we keep a close eye on this, of course, and we have plans for how to act in different -- under different scenarios.

Okay. Another question in regards to some kind of trading update. I know that you don't usually give any guidance here, but speaking of the weather, it seemed like March was better. Could we have any sort of weather update here in the beginning of Q2?

Yes. It's -- Q2 is normally more weather stable, and we're less dependent on the weather in Q2, Q3, which are our high season, especially Q2. Having said that, I mean, the world is a bit crazy to say the least. So we try actually to just focus on what we can control and work as hard as we can to improve our results. But you're right, the quarter ended a bit better than it started. On the other hand, we were very active with sales activities and the market was very competitive in January and February when there was small volumes. So that also explains a part of the gross margin drop that we have had. We have to be -- remain competitive in a difficult market in January and February, especially.

Okay. I think I have one more question, if that's fine. Could we have any update on the IT transformations, like how they are ongoing? Presumably, the Warehouse Management System hasn't gone live yet, if I'm not mistaken. Do you know when that is due? Or can you give a due date?

Yes. We remain with our saying that from last quarter that we expect all of this to be done during the first half of 2026, and that is 7 or 8 weeks off. So that ends in the end of June. So it's quite imminent.

[Operator Instructions] there are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So thank you for your attention. And Fredrik and I wish you a great continuation of the day. Thank you.

Thank you.