MIPS - Interim report January - September 2017
- Net sales increased by 29% to MSEK 27.3 (21.2)
- Operating profit decreased to MSEK 0.1 (2.3). Adjusted operating profit* decreased to MSEK 0.1 (6.4)
- Operating profit includes litigation costs of MSEK 9.2 (0.6) relating to the patent infringement lawsuit** the company has filed
- Operating margin decreased to 0.3% (10.7) Adjusted operating margin* decreased to 0.3% (30.3)
- Cash flow from operating activities decreased to MSEK 6.3 (11.8)
- Earnings per share diluted, amounted to SEK -0.01 (0.08)
- Net sales increased by 54% to MSEK 85.0 (55.1)
- Operating profit increased to MSEK 6.2 (4.6). Adjusted operating profit* rose to MSEK 13.2 (10.5)
- Operating profit includes litigation costs of MSEK 12.3 (2.7) relating to the patent infringement lawsuit** the company has filed
- Operating margin decreased to 7.3% (8.4). Adjusted operating margin* decreased to 15.5% (19.1)
- Cash flow from operating activities increased to MSEK 10.2 (6.1)
- Earnings per share diluted, amounted to SEK 0.18 (0.16)
COMMENT'S FROM THE CEO
Development during the quarter
During the third quarter, net sales increased by 29% to 27.3 MSEK (21.2). Growth comes mainly from higher demand from existing customers within the category Bicycle but also within the category Motorcycle. The adjusted operating margin amounted to 0.3% (30.3), which includes legal costs of 9.2 MSEK (0.6) related to the company's patent dispute. Excluding legal costs, we have continued to improve our operating margin, primarily through efficiency improvements. During the rolling twelve-month period, net sales increased to 116.5 MSEK with an adjusted operating margin of 23.1%.
Patent dispute in Canada
MIPS is involved in an ongoing patent dispute. The company has sued a Canadian helmet manufacturer for patent infringement. The trial phase of the dispute began on 5 September and ended 19 October. A ruling regarding the dispute is expected within 6 months. The process has been preceded by thorough preparatory work with legal and technical expertise since 2014, which intensified at the end of the summer. We have now incurred the major portion of the expected costs for the process. Although the dispute has cost us significant amounts, I'm convinced this is of strategic importance to defend our patents and rights. With our advisors and internal teams focused on these issues, we have further strengthen our ability to defend MIPS patent and market position.
Lower growth rate during third quarter
The growth rate was lower in the third quarter than the trend we have seen earlier during the year. The underlying demand was however higher than what is reflected in the company revenue growth. Some of our customers have challenges in terms of having access to enough production capacity at the helmet factories which means they have not been able to manufacture helmets in line with demand. This has indirectly affected our deliveries. An active dialogue is being held between us and affected customers as well as with representatives of production facilities to get even better insight into our customers' situation.
Positive interest at leading fairs
In September, we participated in the world's largest bicycle fair, Eurobike in Friedrichshafen, Germany. The interest in safety is apparent. Customers and end users are aware, and they make new and clearer demands in terms of safety for their products and equipment. My view is that interest and demand for safety is significantly stronger today than a few years ago. MIPS is today a leading actor in this development which is also evident in the dialogue with existing and potential customers. Both customers and media representatives were clearly interested in and paid attention to our new product solutions.
MIPS will launch two additional product solutions in conjunction with our participation at EICMA in Milan. These give us exciting opportunities within the strategically important categories of Motorcycle and LEAF (Law Enforcement Armed Forces). The product portfolio is expanding, and we can now address even more helmet applications.
Now we look forward to our first real performance in the category Motorcycle. We participate for the first time with products and customers at EICMA, a trade fair in Milan in November, the world's largest fair in this category. Our participating customers present 18 helmets with MIPS BPS of which 6 are brand new launches.
Our long-term ambition remain
MIPS is a fast-growing company and the growth rate will fluctuate between the quarters. With over 50% growth year to date and our current plan, I'm convinced that MIPS will reach its 2020 ambitions.
President and CEO
For further information, please contact:
Johan Thiel, President and CEO
tel +46 73 399 65 88
Max Strandwitz, CFO
tel +46 70 961 17 54
Boel Sundvall, IR
tel + 46 70 560 60 18
This information is such that MIPS AB (publ) is obliged to disclose in accordance with the EU's Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, on 9 November 2017 at 7.30 a.m. CET.
MIPS will present the interim report for January - September 2017 at a teleconference on 9 November 2017
at 10.00 a.m. CET. To participate, please register at: http://emea.directeventreg.com/registration/6697746
MIPS is a world-leader in helmet-based safety and the protection of the human brain. Based on an ingredient brand business-model, MIPS Brain Protection System (BPS) is sold to the global helmet industry. The BPS solution, which is patented in all relevant markets, is based on 20 years of research and development together with the Royal Institute of Technology and the Karolinska Institute, both located in Stockholm, Sweden.
MIPS headquarter with 25 employees engaged in research and development, sales and administration is in Stockholm, where its product and technology test facility is also located. Production and manufacturing operations take place at sub-contractor facilities. On a rolling 12-month basis, Oct 2016/ Sep 2017, MIPS net sales amounted to MSEK 116.5 resulting in an adjusted EBIT-margin of 23.1%. Since its March 2017 IPO, MIPS is traded on the Nasdaq Stockholm stock exchange. For more information, visit www.mipscorp.com.
MIPS' long-term financial targets should not be viewed as a forecast but rather as an objective which the Board of Directors and senior executives believe is a reasonable long-term expectation for the company.
Growth: The goal is to grow organically to achieve net sales in excess of MSEK 400 by 2020.
Profitability: The goal is to achieve an EBIT-margin in excess of 40% by 2020.