Interim report January–March 2021

January-March 2021

• Net sales increased by 48% to SEK 83m (56),
  Organic growth amounted to 66% during the quarter 

• Operating profit amounted to SEK 39m (16)

• Operating margin was 47.4% (29.1)

• Cash flow from operating activities amounted to SEK 69m (15)

• Earnings per share, diluted, amounted to SEK 1.22 (0.47)

CEO’s comments

Strong start to the year with 66% organic growth
2021 got off to a flying start with 66% organic growth during the first quarter, despite the fact that we see challenges in the world around us, especially in the supply chain. Once again, our business model has proven to be resilient, and we managed the challenges we faced successfully. The first quarter, which is normally our smallest quarter, became the fourth largest quarter ever in terms of sales. I am also pleased to note that we for the first time reached an EBIT margin above 40 percent in the first quarter. Growth was primarily driven by the Sport helmet category, which continued to show good demand for bicycle helmets. It is important to note that we have soft comparative numbers, as most factories did not produce at full capacity during the first quarter last year. We saw a softer development in the Motorcycle category during the first quarter, mainly related to the phasing of production during the year and prioritization in helmet factories. Our positive view of the Motorcycle category remains unchanged.

Growth continues primarily to be with our existing customers who are expanding their product range with MIPS and we see continued good development in the number of new customers.

Operating profit increased by 141 percent during the quarter and amounted to SEK 39m (16). We also saw a strong improvement in the operating margin, which increased to 47.4% (29.1). Additionally, we achieved strong development in operating cash flow with SEK 69m (15).
 
Continued investments in marketing
Raising awareness of the MIPS brand and its products is a priority for us. We work with several different tools to raise awareness around the world. Our most important tool is PR, where we have expanded our collaboration with more partners to increase our reach and the understanding of MIPS’ function in a helmet. The process of going from trade press to daily media is an important part of becoming more relevant to the average consumer.

During the quarter, we welcomed additional athletes to our Team MIPS. First out was Kate Courtney together with the Scott SRAM team, which also includes former Olympic gold medalist Nino Schurter. Kate, who in addition to being one of the foremost in mountain biking, is a fantastic ambassador for raising awareness about brain damage and the importance of having a good helmet.

The other team, that we launched in mid-April, is the Honda RC team, which is a world leading in Motocross. The team consists of several world-leading racers, the foremost being Tim Gajser. He is a four times MXGP champion. The Honda team is an important part of being able to establish ourselves in Motorsport. We will continue to launch additional athletes in the year 2021.

Helmet category Sports - Strong demand for bicycle helmets
Historically, the first quarter has been dominated by the production of primarily snow helmets. This was not the case this year, since most of our sales continued to support the increased demand for bicycle helmets around the world. We have previously talked about that the industry was projecting it would take at least until the end of the first half of the year before stock levels return to normal again. Now with less than a quarter to go, we see that this will not be the case and that stock levels will continue to be challenged at least for the rest of the season.

We have previously communicated that we foresaw a soft season ahead of us in the sale of snow helmets. However, global developments were less negative than we originally expected. Southern and Central Europe has had a challenging season with closed ski resorts far into the season. While in MIPS' larger markets, such as the USA and the Nordic countries, sales of ski helmets have been relatively good. We do not expect that stock levels will hamper sales for next season, to the extent that we previously thought.
 
Helmet category Motorcycle - Continued good consumer demand for our solutions
In our Motorcycle category, we saw soft sales resulting in a decrease compared to last year. The reduction is entirely due to a shift in production of motorcycle helmets with MIPS and a negative impact from currency exchange rates. There are a number of new brands that are launching helmet solutions with MIPS and we continue to see a good development at the consumer level, which means that we will see strong growth in this category this year as well.
 
Helmet category Safety - Deployment with our first international customer
In connection with the release of the Year-end report, our first international collaboration in the Security category was communicated with the English helmet brand Centurion. The first launch of a helmet equipped with MIPS safety system took place at the end of the quarter and the first helmets have reached customers. Our launch attracted great interest in England and we continue to see good potential for continued rollout to other brands and other international markets.
 
Good start to 2021. Our financial goals remain unchanged
2021 has started in a very satisfactory way. We have continued to advance our positions in all three of our categories. We continue with our activities to strengthen our brand with two new teams in Team MIPS. We see continued strong demand for our products and therefore I look forward to the journey towards achieving our long-term goals.
 
Stockholm, April 2021
 
Max Strandwitz
President and CEO