Mips Interim report January - June 2022

April-June 2022

• Net sales increased by 45% to SEK 206m (142), organic growth amounted to 25% during the quarter
• Operating profit amounted to SEK 107m (72)
• Operating margin was 51.7% (50.7)
• Cash flow from operating activities amounted to SEK 55m (56)
• Earnings per share, diluted, amounted to SEK 3.01 (2.08)
• Updated long term strategy and new financial targets for 2027 were presented at a Capital Markets Day, 9 June. The new targets are; to achieve net sales of more than SEK 2bn, an EBIT margin above 50% and distribute more than 50% of net earnings in dividend

January-June 2022

• Net sales increased by 53% to SEK 343m (225), organic growth amounted to 33%
• Operating profit amounted to SEK 168m (111)
• Operating margin was 49.1% (49.5)
• Cash flow from operating activities amounted to SEK 92m (125)
• Earnings per share, diluted, amounted to SEK 4.81 (3.30)

CEO’s comment

Record high net sales and continued high profitability
Continued success in the Sport and Motorcycle categories means that we were able to deliver a growth in sales of 45 percent, even though we are comparing with our very strong second quarter of last year. Organic growth was 25 percent after adjustments for currency effects. Sales have increased by 53 percent year to date, and organic growth was 33 percent after adjustments for currency effects.

Operating profit grew by 48 percent to SEK 107m (72) in the quarter. During the first six months of the year the operating profit has increased by 52 percent to SEK 168m (111). This increase is primarily due to higher sales. The operating margin amounted to 52 percent (51) this quarter and to 49 percent (49) for the first six months. The operating cash flow amounted to SEK 55m (56) during the quarter. During the first six months of the year, the operating cash flow totaled SEK 92m (125).

Launch of new financial targets
Strong growth in recent years along with new opportunities identified within our categories have prompted us to update our strategy and our long-term financial targets. These were presented at our Capital Markets Day in June. The new strategy has been built on three key strategic pillars: 1) Grow existing business, 2) Open up new channels and markets and 3) Capture new opportunities within helmet safety.

We have kept the same structure for our targets, but we have raised our long-term ambition. Two targets have been updated: the target for net sales has been increased to more than SEK 2 billion by the end of 2027 (previously SEK 1bn by 2025), and we have set a higher profitability target aiming to retain an EBIT margin in excess of 50 percent (previously >40 percent). Our target to distribute dividends corresponding to at least 50 percent of the net profit remains the same.

Significant amount of new helmet projects with customers implemented
We are still seeing solid demand for our products and so far this year we have carried out more customer projects than in any other year. Most projects are still within the Sport helmet category, but we are seeing the number of projects increasing within the Motorcycle and Safety categories, which will lead to greater volumes going forward.

In terms of the long-term trends in the industry, we see good opportunities to maintain growth in all our categories as communicated at our capital markets day. Awareness of Mips is growing around the world and consumers are willing to pay extra for products fitted with our technology.

Shorter term, it is more difficult to predict demand, but we are convinced that we will continue to gain market share even if short-term fluctuations would occur.

Helmet category Sport – continued strong progress within snow helmets, uncertainty within bike.
The good progress made in the Sport category continued throughout the second quarter. The majority of growth this quarter came from snow helmets, but we also saw growth in the bike sub-category. Growth is still being driven by our existing customers continuing to increase the share of helmets in their ranges with our technology.

The sales progress in the snow sub-category has been good in the different geographic markets. This clearly demonstrates that there has been a pent-up need to get out into nature even during winter. In line with previous communication, worldwide inventory levels normalized within the bike sub-category in the second quarter. However, inventory levels remain imbalanced since there are very many lower-priced products but fewer more expensive and more advanced products. This will almost certainly lead to inventory corrections in the coming months to rebalance inventory levels with the right products. We do not expect this to affect us over the long-term, but it may have an impact when it comes to the short-term demand.

During the spring the market has speculated about whether growth in the bike sector as a whole is over after a period of extreme growth in connection with the pandemic. Along with the majority of the industry, we do not believe this is the case. There is a lot of activity in the industry in terms of integration of the value chain from helmet brands that expand their channel offering directly to consumer sales, and from increased consolidation activity among brands. The general consensus seems to be that there will be a long-term increase in the demand for bike-related products, primarily driven by the positive trends we are seeing regarding electric bikes, commuting and consumers wanting to spend more time outdoors.

Helmet category Motorcycle – growth during the quarter despite very strong comparative figures
We experienced growth in the Motorcycle category with a 14 percent increase in our sales in the quarter, despite the prior year's quarterly growth of 370 percent. Growth is at 56 percent so far this year, and we believe that the trend will remain positive in this category for the year ahead. This quarter’s growth is mainly due to good progress with our existing customers, but it also comes from more new customers launching solutions with Mips’ technology.

Helmet category Safety – organization in place to drive sell-through volumes
We currently have ten customers that have launched helmets with Mips’ technology for the Safety category, with a good geographical distribution in our most important markets. We have therefore expanded our organizational capacity in our most important markets so that we can provide training to end customers and drive sell-through volumes together with our most important partners.

This quarter we also launched our partnership with Arco, by far the largest distributor of safety equipment in the UK. The purpose of this partnership is to collaborate to raise the awareness of workplace-related head injuries. This is a core element of Mips’ expansion into the UK which is a significant market.

The focus for 2022 remains the same, to drive sell-through of volumes together with our existing customers and naturally, establish partnerships with new customers.

A strong first six months
I am very satisfied with the results we have achieved during the first six months of the year, with organic growth of 33 percent in spite of the challenging external conditions and very strong comparable figures from 2021. In the short-term, there is still uncertainty in the Sport category in terms of the erratic behavior of the bike sector, but our assessment is that long-term demand will continue to be good in all our helmet categories. With our new strategy and new initiatives at the ready, we are prepared for the opportunities and challenges that lie ahead, and I look forward with confidence to the journey towards our long-term targets.

Stockholm, July 2022

Max Strandwitz
President and CEO