Profoto Holding AB (publ) (PRFO) Earnings Call Transcript & Summary

Welcome to the Profoto Q2 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Anders Hedebark; and CFO, Linus Marmstedt. Please go ahead.

Thank you. Welcome, everyone. Thank you for listening in to the second quarter presentation of Profoto. Yes, we had a tough quarter. The market conditions were tough and cautious, and it resulted in a weak quarter for us, the second quarter. To summarize the quarter, our net sales decreased by 17% to SEK 242 million (sic) [ SEK 142 million ], and the organic growth taking the currency effect into consideration was 14%. We had negative sales development in basically all regions, especially in Europe, EMEA was a weak quarter, and we had continuing high uncertainty in the market. This resulted in an EBIT level of 0, so no profit, but also no loss. And the deterioration in the EBIT is only because of the lower sales, even though we had lower costs compared to previous year. And this is based on that we are continuing to obviously having a stronger cost control and resulting in a stable cash flow from operating activities and more of that from Linus later on in the presentation. On the good side, the ProPanel, we had a good positive first initial reception in the market. And we see the rental companies that have invested in the product, they are seeing that the product is moving in rental. We are continuing more of launch activities, and I will come back on that. So talking more about it in more detail on the panel that we are doing as we planned. It is important to us to get into the cinema side of the lighting business. And this is really strengthening our LED offering. And this is part of a full product lineup that we are offering on the LED side. We have great positive feedback from customers. It is a small niche in the market, but the feedback is great. It is meeting clear market needs and enhancing our product portfolio. So we are slowly gaining traction, even though it had limited financial effect in Q2, we expect the revenue to be better gradually slowly over the year, the coming 2 quarters. Customers and gaffers, we see it that they are demanding the products for their projects from the rental companies. But as I said, we are very early in the launch cycle. And please bear in mind that film projects, they do have a long planning cycle. So it takes time before the demand materialize in real rentals and in rentals materialize in purchases from us into the market. So one of the customers using the product is Cullum Ross, Gaffer Callum Ross that use it for the film, The Butler with Jean Reno. And here are some images from that production. And how the light is used in different settings. Also, Dessie Coale used it for the TV series Baywatch. If we look into the regions, we had a similar situation in all regions, but where EMEA and Europe was particularly and significantly weak and where we see a minus 27% change in sales. But there are some explanations to this apart from the lower demand in the market. We had some unusually high supply of second-hand products in the market depending on some rentals selling off their full product range due to financial problems. So EMEA was tough. We also had negative organic growth in Americas. Here, we could see a sell-in effect in the second quarter in 2025, which made the comparables very tough. We also had regional variations in APAC, where China has a solid performance, when Japan and the rest of APAC performance is weaker. So 12% down in Americas, 27% down in Europe and APAC, minus 8%, resulting in this minus 17% lower sales for the full group. Thank you. I leave the word to you, Linus.

Okay. Thank you, Anders. And as you mentioned, it was a weak quarter with a flat result around 0. And it's mainly due to 3 key factors. One is, of course, the top line where we see the organic growth of minus 14% and also the sell-in effect from compared to last year. So but all in all, top line was on the weak side. But we also had a product mix effect where we had a lower share of high-margin products in the Studio segment and the automation. So that's more of a temporary effect during the quarter. So it's not a structural issue, but it is -- had a negative impact during the second quarter. And the third effect was more related to the CapEx depreciation effect as I will come back to in the next slide. But all in all, a weak quarter on the -- with an EBIT of around 0. And on the next slide, this is a picture that we have presented before. And as you can see, there is -- the total cost base is reduced by close to 20% quarter-by-quarter compared to last year. But also as we communicated in earlier statements, we will see a pickup in the second quarter, and this is exactly what happened. There is a small increase during the quarter, and that's purely related to 2 things. One is the launch of the ProPanel, which includes several fairs and events and so on. So that's one effect and the other effect is related to the reorganization of our U.S. operation where we had some personnel changes, which increased the costs somewhat. But all in all, very much in line with expectations. So there is no underlying trend with an increased cost base. That's important to state. And here is what I mentioned. Here is the what we have seen during the last 3, 4 quarters where we have a capitalization rate of around SEK 10 million per quarter, but an increased depreciation level on approximately range of SEK 20 million. So the net effect compared to last year in the same quarter is actually close to SEK 20 million. And that's, of course, quite substantial impact on the EBIT, the underlying EBIT. And this is a level that you can expect going forward. So now we reflect more on what we are doing and how we see the future level of R&D capitalization. And on the positive note, despite that we have a quite weak top line and then yes, flat EBIT, we generate cash during the quarter, and we had a positive impact on operating cash flow of around SEK 8 million, but we also, of course, have an R&D investment of SEK 9 million. So all in all, it's around flattish. But during the quarter, we managed to amortize our gross debt with SEK 20 million, which is good and absolutely important to have the financial flexibility to support the operation. So if you compare to the same quarter last year, we have actually managed to reduce our net debt by SEK 50 million, and that's a combination of lower cost base, but also a strong focus on the net working capital. So all in all, we have a strong financial situation despite the tough market. And to summarize, we have mentioned that we have seen uncertainty in the market throughout the world actually. So it's weak sales in all markets, but especially in EMEA. And the result is affected by primarily weak sales, but also the product mix. And so that's despite actually that we have this close to 20% lower cost base. And as Anders mentioned, the ProPanel has been positively received. However, it's very in an early stage, but it's going according to plan, and we expect to see a gradual increase the coming quarter. But all in all, it's very much in line with expectation and what we have communicated in previous quarters. And it's important that, of course, we keep the cost control very tight. We don't expect any major changes during the coming quarters. But of course, we look at all the costs all the time. And just a final word regarding the financial position. It's -- we are generating cash and we keep our financial position in a fairly strong position. So that's good. And also, it's important that we can support our operation as we are entering new markets with new business models where it's important to really have the flexibility to support the rentals and the new cinema customers. So we have a good dialogue, and we are in a strong position to have that discussions going forward. So that's about it in a nutshell.

[Operator Instructions] There are no phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Right. And we haven't received any questions by e-mail. So I think that's about for this time. And thank you, everybody, for listening in, and we keep on fighting in the global market. So thank you, everybody, and have a nice summer.

Thank you.