MIPS interim report January - September 2019

JUL – SEP

• Net sales increased by 3% to SEK 52.9m (51.2). During the quarter, the organic growth was -6%
• Operating profit amounted to SEK 20.5m (20.8). Adjusted operating profit* increased to SEK 20.9m (20.8)
• Operating margin decreased to 38.6% (40.7). Adjusted operating margin* decreased to 39.5% (40.7)
• Cash flow from operating activities decreased to SEK 11.6m (31.0)
• Earnings per share diluted, amounted to SEK 0.62 (0.61)

JAN – SEP

• Net sales increased by 38% to SEK 180.4m (130.3). During the first nine months of the year, organic growth was 28%
• Operating profit increased to SEK 69.0m (44.3). Adjusted operating profit* increased to SEK 70.8m (44.3)
• Operating margin increased to 38.3% (34.0). Adjusted operating margin* increased to 39.2% (34.0)
• Cash flow from operating activities decreased to SEK 43.5m (45.2)
• Earnings per share diluted, amounted to SEK 2.12 (1.36)

CEO’S COMMENTS

More customers than ever, however tariffs impacted the volumes during the quarter
During the third quarter, net sales increased by 3% to SEK 53m (51). Adjusted for currency effects and acquisitions, the organic growth was -6% in the quarter. During the first nine months of the year, net sales thus increased by SEK 50m to SEK 180m (130), an increase by 38% and with an organic growth of 28%.

The declining sales growth in the quarter was mainly caused by a noticeable slow start of the quarter. Several of our larger U.S. customers cautiously took a passive stance in light of the uncertainties associated with the new trade tariffs between the U.S. and China which were implemented during the quarter.

Like other suppliers and brands operating in the bike and snow sport industries in the U.S., we saw a recovery of the order backlog towards the end of the quarter and we believe that the declining sales growth was solely temporary. Today, MIPS’ relationships with these U.S. customers are stronger than ever before. In addition, we have also initiated partnerships with a number of, to us, new helmet brands and we remain confident in our positioning in the overall market.

The operating profit (EBIT) for the quarter amounted to SEK 21m (21) and we achieved an operating margin of 38.6%. The adjusted operating profit amounted to SEK 21m with an adjusted operating margin of 39.5%. During the first nine months of the year, operating profit increased to SEK 69m (44) with an adjusted operating margin of 39.2% (34.0).

Exciting launches in connection with the global fairs held during the autumn
In the beginning of September, MIPS participated the world’s largest bike fair, Eurobike, held in Friedrichshafen, Germany. At this fair, several large German helmet brands such as UVEX, Alpina and KED launched new helmets equipped with MIPS technology, being brands that historically have been hesitant to implement our technology into their helmets. We look forward to the opportunity of growing, together with these brands, in the German market.

We are also happy to resume our cooperation with POC and to jointly launch several helmet models equipped with MIPS technology during the coming years, the first being a child helmet intended to be launched during the summer of 2020.

The innovators behind the mips technology received the prestigious Polhem prize
The fact that MIPS is built on groundbreaking research and technical innovation is well known. This was once again confirmed when the Swedish Association of Graduate Engineers in October awarded Peter Halldin (MIPS’ Chief Science Officer), Hans von Holst and Svein Kleiven the prestigious Polhem Prize for their work with the MIPS technology.

New targets presented
In September, we presented our new long-term plan extending to 2025. Going forward we intend to focus on three main categories, Sports helmets, Moto helmets and Safety helmets. These focus areas, together with a broader product offering, has increased our addressable market, from 43m to 130m helmets giving us a substantially larger market to penetrate. Our new plan and strategy include a target of reaching more than SEK 1bn in net sales by 2025, with an EBIT margin of more than 40% and with an ambition to pay at least 50% of the annual net earnings in dividends over time.

In order to execute our new plan we have started to strengthen our organization to be able to position ourselves even better in the Moto category and continue our progress within the Safety category, being a category where we see great potential. We are mainly working on strengthening our Sales organization, to obtain more category specific competence, as well as our Marketing and R&D organizations.

With the customers we are currently engaged with and the new strategic initivatives that have been launched, I feel comfortable to say that we are in a good position to deliver in accordance with our newly set 2025 targets.

Max Strandwitz
President and CEO