Interim report January–March 2023

January-March 2023

• Net sales decreased by 35% to SEK 88m (137), organic growth amounted to -41% during the quarter
• Operating profit amounted to SEK 15m (62)
• Operating margin was 17.5% (45.3)
• Cash flow from operating activities amounted to SEK -42m (37)
• Earnings per share, diluted, amounted to SEK 0.55 (1.81)

Expected soft bike market affected sales and profit in the first quarter
Soft sales in the sub-category bike meant that net sales in the first quarter decreased by 35 percent compared to the previous year. On the other hand, sales excluding bike showed good growth in the quarter. As expected, the slightly more balanced mix of categories in the quarter meant that the first quarter was less negatively affected by a cautious bike industry in general.

Bike resellers in the key US and European markets have continued to have higher inventory levels in April than they would like, and the season started relatively late due to the cooler weather. The general picture in the market, which I share, is that the situation will improve during the second quarter. The cautious start to the bike season has meant that our customers, the helmet manufacturers, have been restrictive with new orders. Despite a favourable product mix with a larger share of sales to other categories that continue to grow, the second quarter will also be relatively soft.

Operating profit decreased by 75 percent, amounting to SEK 15m (62) in the quarter, and the operating margin amounted to 17% (45) this quarter. The decrease in operating margin can largely be explained by the lower sales, continued investments within our strategic initiatives in research and development and marketing as well as negative impact of currencies.

Helmet category Sport – on the back of a strong snow season but a challenging market in bike helmets
We continued to see a challenging development within bike during the first quarter. From a sales point of view, the first quarter is seasonally slower within bike. Last year we saw a slight delay in the production of helmets that there had not been time to manufacture in the fourth quarter of 2021 and were instead produced in the first quarter of last year. Within snow we have had a very strong winter season, mainly in the north American market. Due to the strong season within snow, our assessment is that there will continue to be good growth in these types of helmets coming quarters.

During the first quarter we were one of the main sponsors of the Gothenburg Horse Show, one of the largest indoor equestrian competitions in the world. The competition was watched by 70,000 spectators in the arena and by more than 35 million TV viewers worldwide. We witnessed great interest in Mips during the event and it is an important strategic initiative to drive our growth within equestrian sports.

Helmet category Motorcycle – greater attention in the market thanks to Moto GP
An exceptionally strong first quarter in the Motorcycle category last year meant that sales within the category decreased by 33 percent in the quarter. In the first quarter of 2022, the category increased by 150 percent compared to 2021, after an unmet need in production from previous years. We continue to see a good interest in Motorcycle and our positive view on the future remains.

We are very pleased that our customer Kabuto has chosen to use one of our new solutions, Mips Integra TX, in the helmet that Aleix Espargaró, one of the most famous riders in Moto GP, will wear during this year's competitions. This is the first helmet fitted with the Mips safety system within the prestigious Moto GP circus and the fact that Aleix will be one of Mips' ambassadors has already created strong media momentum in our quest to establish the brand within this type of helmet.

Helmet category Safety – strong development in line with our ambitious plans
We continued to see good progress in Safety with an increase in sales compared to the prior year. We have announced several customer partnerships and those customers that have already launched helmets fitted with Mips have begun to see increased sell-through in the market. Together with existing and new customers we will participate in a number of fairs around the world. This is another step in building the awareness of Mips in the Safety category.

Challenges during spring, positive outlook going forward
Despite the drop in sales shown in the first quarter, we see many bright spots going forward. Both we and the industry as a whole continue to be long- term positive about the bike market. We expect a gradual recovery of the bike market already in the second quarter and assess that Mips as a company will return to growth in the second half of the year.

In snow, we are leaving a strong winter season behind us and see good interest in the coming season. In the Safety category we are following the ambitious growth plan we set. Motorcycle has good growth prospects going forward.

We have continued to keep up the pace of investment in our strategic initiatives within product development and have strengthened the organization further as well as launched several new products. From the latest measurements we can see that awareness of Mips is growing among consumers around the world and that the associations with the brand is even more positive. In other words, we are strongly equipped to face the recovery and growth in the market that we are convinced is coming.

Given all of this, I look forward to continuing to make progress towards our long-term goals.

Stockholm, April 2023

Max Strandwitz
President and CEO