Year-end report 2022

October-December 2022

• Net sales decreased by 46% to SEK 107m (198), organic growth amounted to -53% during the quarter
• Operating profit amounted to SEK 24m (104)
• Operating margin was 22.0% (52.6)
• Cash flow from operating activities amounted to SEK 47m (81)
• Earnings per share, diluted, amounted to SEK 0.71 (3.00)

January-December 2022

• Net sales decreased by 7% to SEK 563m (608), organic growth amounted to -19%
• Operating profit amounted to SEK 229m (326)
• Operating margin was 40.7% (53.6)
• Cash flow from operating activities amounted to SEK 236m (277)
• Earnings per share, diluted, amounted to SEK 6.63 (9.64)
• The Board of Directors proposes a dividend of SEK 5.50 (5.00) per share, corresponding of 82% of net earnings during the year

A challenging fourth quarter closes a different kind of year
The fourth quarter closes a different, challenging but also successful year. A drastic slowdown in the bike sector in the second half of the year had a substantial negative impact on sales in Sport, our largest category. While we had to deal with the short-term challenging market for our largest category, we have taken big steps for the future through several initiatives and successes within other categories. We have also continued to strengthen our brand position, product portfolio and organization.
 
Sales decreased with 46 percent (53 percent after adjustments for foreign currencies) for the fourth quarter. The 2022 full year thus closed with a 7 percent decrease in sales. Organic development after adjusting for exchange rate effects decreased with 19 percent compared to last year.
 
We have a long term strategy and, as previously communicated, we are continuing our ambitious investments in product development and brand building. The costs of these investments for future growth combined with a temporary slowdown in the bike category, as well as negative exchange rate effects, had a negative impact on profits for the fourth quarter. Operating profit amounted to SEK 24m (104) during the quarter, a decrease of 77 percent. During the year, operating profit decreased by 31 percent to SEK 175m (255).
 
The operating margin amounted to 22 percent (53) in the quarter. For the full year, the operating margin decreased to 41 percent (54). The operating cash flow continued to develop well, amounting to SEK 47m (81) during the quarter. The operating cash flow amounted to SEK 236m (277) during the year.
 
We are pleased with the progress we made in our sustainability work this year. We have delivered according to the three main targets that were set for the year, which means that we are now monitored and have been approved by the SBTi initiative, that we have signed the UN Global Compact and that we have started to use recycled materials in our products. We therefore believe that we have a solid platform for our continued sustainability work.

Strong belief in our long-term strategy to drive profitable growth
While we are experiencing short-term challenges due to a temporary slowdown within the bike retail chain, we are fully committed to our long-term growth strategy and our long-term financial targets. Though the number of bike helmets produced has dropped in a challenging market after the record year 2021, we have continued to increase our market share with more helmet models and brands using our solutions. We have also taken market share within our two other categories, Motorcycle and Safety where we continue to deliver strong growth.
 
We have continued to invest at a steady pace in our strategic initiatives. Our product development department has grown during the last two years to be able to develop new technical solutions and manage the increased number of customer projects with our existing solutions.
 
Furthermore, this year we have launched several new technical solutions that are important for the future. The first of these solutions, Air Node, was launched with Specialized at the start of the Tour de France bicycle race. Air Node will be able to be offered as an after-market product, so that the users themselves can replace the comfort padding fitted with the Mips safety system, which is an important step in bringing Mips even closer to consumers. We launched our Integra Split solution this year, where Mips’ technology is completely integrated into the actual helmet. This solution was also received positively by the market. The third solution, Integra TX, was launched at EICMA, the world’s largest motorcycle fair. This is a solution by which the Mips safety system is fully integrated into the inner textile layer of the helmet, and this too received great interest from both customers and consumers.
 
During the autumn fairs we launched the new graphic design of our products. This was well received by customers, retailers and the media, which we believe will further strengthen Mips’ leading market position.

Helmet category Sport - bike weak but snow strong
The weak development in the Sport category continued in the fourth quarter with a 50 percent decrease in sales. As a substantial portion of Mips’ fourth-quarter sales usually comes from the bike subcategory, the weak market for bikes had a significantly negative effect on our overall sales. Within the snow subcategory we continued to see good sales, and growth for the year as a whole amounted to 48% for this category.
 
We stand by our earlier assessment that the bike market will start to recover during spring 2023. Our assessment is still that over time there will be excellent opportunities for growth and solid consumer demand in the bike category, mainly driven by our increased market penetration and the strong underlying trends regarding these types of helmets.

Helmet category Motorcycle - continued success and first helmet within Moto Grand Prix
Developments remained positive within the Motorcycle category, and we saw a 33 percent increase in sales during the quarter. While this increase in sales was primarily driven by existing customers expanding their product ranges with the Mips safety system, we also saw growth from new customers launching products equipped with Mips’ technology. During the quarter we launched our new Integra TX solution in Kabuto’s Moto GP helmet F-17, which is the first helmet within the prestigious Moto GP that has a Mips solution integrated into it.
 
For the full year this category grew by 35 percent. We still have a positive outlook for the Motorcycle category, and we see continued strong demand for helmets equipped with the Mips safety system.

Helmet category Safety - broader customer base
2022 was a successful year within the Safety category. Our target for the year was to establish a broad customer base, which we have achieved through a total of eleven launched partnerships, and our efforts are starting to bear fruit with increased sales toward the end of the year. We are also starting to see greater acceptance of and demand for Mips’ products amongst the decision-makers of the largest end customers, such as major construction companies. In 2023, our focus will be on continuing to drive sell-through volumes together with the customers we have established relationships with during the year, and we look forward to an exciting year of growth.

Strategy and our financial targets
Our profitable growth over the recent years meant that we were ahead of plan, compared to our previous financial targets. For this reason, we updated and presented our new financial targets and updated strategy in June. Growth will still mainly be driven by our existing customers, but our broader strategy includes identifying how we target our product portfolio to new end users in existing and new markets, how we add after-market products and how we develop more solutions for helmets than we do today.

Many positive steps in a challenging environment
I am very pleased with how we have dealt with the challenges we have faced during the year. We have continued to advance our position in all three categories, we have carried out more customer projects than in any other year, we have made great progress in our sustainability work, we have increased our pace of product development and launched three new solutions this year and accelerated our marketing investments to ensure that we continue to raise the awareness of Mips around the world.
 
I look forward to our journey towards our long-term financial targets. All Mips employees have responded to the challenges we've faced in a very good way, and I especially want to thank them all for how they have taken on our changing environment.
 
Stockholm, February 2023

Max Strandwitz
President and CEO