MIPS Interim report January - September 2018
- Net sales increased by 88% to SEK 51.2m (27.3). Adjusted for currency exchange rate effects, the increase was 77%
- Operating profit increased to SEK 20.8m (0.1).
- Operating profit includes litigation costs of SEK 0.6m (9.5) relating to the company's patents
- Operating margin increased to 40.7% (0.3)
- Cash flow from operating activities increased to SEK 31.0m (6.3)
- Earnings per share diluted, amounted to SEK 0.61 (-0.01)
- Net sales increased by 53% to SEK 130.3m (85.0). Adjusted for currency exchange rate effects, the increase was 53%
- Operating profit increased to SEK 44.3m (6.2). Adjusted operating profit also increased to SEK 44.3m (13.2)
- Operating profit includes litigation costs of SEK 4.7m (12.5) relating to the company's patents
- Operating margin increased to 34.0% (7.3). Adjusted operating margin also increased to 34.0% (15.5)
- Cash flow from operating activities increased to SEK 45.2m (10.2)
- Earnings per share diluted, amounted to SEK 1.36 (0.18)
Substantial increase in sales with 77% organic growth, generates strong profitability
I am extremely pleased that MIPS continues to grow rapidly, profitably and in line with our 2020 plan. Net sales increased organically during the quarter by 77% to SEK 51.2m and the growth was driven by increased penetration with our major customers in all product categories but also somewhat impacted by a soft prior year comparator.
Volume growth, our strong gross margins, the scalability of our business model and higher legal costs during the previous year were all factors contributing to the significant improvement in operating profit for the quarter. This led to an EBIT margin of more than 40% in the quarter. In addition, we generated a strong operational cash flow of SEK 31.0m (6.3).
This means that during the first nine months we increased our net sales organically by 53% to SEK 130.3m. Profitability also improved significantly with an adjusted operating profit of SEK 44.3m (13.2) and with an EBIT margin of 34%, we have taken further steps towards our 2020 goal of an annual EBIT margin above 40%.
Positive development in all categories
We have developed more in-depth partnerships with our customers, broadened our customer base and increased our sales volume in all product categories. Our expanded portfolio of safety solutions enables us to more easily assist our customers to integrate MIPS BPS in more types of helmets as well as to offer products across additional market price points. Furthermore, our customers are getting positive feedback from retail outlets that consumer demand for MIPS solutions in helmets is increasing.
Award for one of our innovative solutions
At a textile fair in Dallas, MIPS won the award for the best use of innovative textile technology with one of our textile-based solutions. The solution is primarily designed to be implemented in protective helmets for relevant professional use but can also be used in other helmet applications. The award is a testimony of our innovation capability and it is inspiring to get recognition outside our traditional categories.
Tour riders wear MIPS
In all the major Grand Tour bicycle races conducted this summer, television viewers worldwide have been able to see MIPS BPS-equipped helmets used by more than half of the participating teams. MIPS BPS-equipped helmets are commonly seen on the podiums and shows that safety is a high priority also at these venues, generating positive PR for MIPS.
No tariffs for helmets expected
In recent months there has been some concern over the introduction of tariffs on goods imported from China into the US market. Tariffs would likely lead to increased consumer prices for helmets. The leading helmet manufacturers expressed their concern to the authorities about serious consequences if American consumers would decrease their usage of such important protective equipment as helmets due to increase in consumer prices. In mid-September, US authorities chose not to impose tariffs on helmets in the initial implementation of trade restrictions.
Strong momentum on the market
We have a closer working relationship with our customers than ever before, we are attracting new customers and generating positive PR. Furthermore, there is an increased global awareness and understanding of the benefits of MIPS BPS solutions among helmet users. This is resulting in increased market penetration and due to our scalable business model, we are continuously making progress towards our 2020 financial goals. Even more important is that the success is creating a strong foundation for our long-term strategic growth ambitions.
President and CEO