MIPS YEAR-END REPORT 2019

Oct - Dec

• Net sales increased by 41% to SEK 87.5m (62.2).
  During the quarter, the organic growth was 33%

• Operating profit increased to SEK 39.0m (28.7).
  Adjusted operating profit* increased to SEK 39.7m (28.7)

• Operating margin amounted to 44.6% (46.1).
  Adjusted operating margin* amounted to 45.4% (46.1)

• Cash flow from operating activities amounted to SEK 19.7m (23.8)

• Earnings per share, diluted, increased to SEK 1.16 (0.85)

Jan - Dec

• Net sales increased by 39% to SEK 267.9m (192.5).
  During the year, organic growth was 29%

• Operating profit increased to SEK 108.0m (73.0).
  Adjusted operating profit* increased to SEK 110.5m (73.0)

• Operating margin increased to 40.3% (37.9).
  Adjusted operating margin* increased to 41.2% (37.9)

• Cash flow from operating activities amounted to SEK 63.2m (69.1)

• Earnings per share, diluted, amounted to SEK 3.28 (2.21)

• The Board of Directors proposes a dividend of SEK 3.00 (2.50) per share,
  corresponding to 89% of the net earnings of the year

CEO’S COMMENTS

Strong completion of the year summarizes another successful year
During the fourth quarter, net sales increased by 41% to SEK 88m (62). Adjusted for currency effects and acquisitions, the organic growth amounted to 33% in the quarter. For the full year, net sales increased by SEK 75m to SEK 268m (193), which is an increase by 39% and an organic growth of 29%. Our largest customers continued to be the main contributor to the increased sales during the year. We did also see a significant inflow of new customers and a good growth and profitability within all categories we are active within.

The adjusted operating profit for the quarter amounted to SEK 40m (29) with an adjusted operating margin of 45% (46). For the full year, the adjusted operating profit increased to SEK 111m (73) with an adjusted operating margin of 41% (38), well in line with our financial targets. In light of the good performance a dividend of SEK 3 (2.50) per share is proposed which corresponds to 89% of the net earnings of the year, thus exceeding our long-term ambition to distribute at least 50% of the net earnings per year.

Strong platform for continued growth
During 2019 we implemented the MIPS Brain Protection System (BPS) in more helmets than ever before. As of 31 December 2019, we have launched MIPS’ technology in 583 (448) helmet models and, today, we have over 100 (78) customers located all over the world. I am particularly pleased with now having several strategically important German customers onboard and that we doubled our sales to our European customers during the year. I am also delighted that we have entered into both the Safety helmet and Hockey helmet category and delivered MIPS’ technology to close to 5 million helmets, on an aggregated basis, during the year. We have a unique market position and a solid platform for delivering continued growth.

The trust in the MIPS brand has increased
The MIPS’ brand is continuously being strengthen through repeated best in test acknowledgments by independent testing institutions, positive articles in several sport and category specific media and a broader offering of helmet brands. This has led to an increased consumer demand for helmets branded with the yellow MIPS logotype.

We have also noted that more and more customers have taken the strategic decision to offer the MIPS BPS in all their helmet models. The American helmet brand Specialized received a great response in bicycle media when communicating their all-in commitment with MIPS some time ago. During the quarter, we saw two additional examples of this when the lifestyle helmet brand Nutcase as well as Bollé announced that they intend to implement the MIPS BPS in all their bicycle and snow helmet models. Naturally, we are very pleased with these brands’ commitment to offer safer helmets.

Minor impact from trade tariffs during the quarter
During the third quarter, we communicated that we believed the negative impacts on the sales to U.S. helmet brands resulting from the trade tariffs between China and the U.S. were only of temporary nature. The strong momentum in the fourth quarter and positive signals from our customers make us believe that the production is now back at normal levels again.

Coronavirus causing a nervous market
The recent weeks’ news regarding the outbreak of the Coronavirus in China have caused a nervousness in the entire industry as a large share of the helmets in the world is manufactured by Chinese suppliers. Our wholly owned Chinese subsidiary, our suppliers and the majority of our customers’ manufacturers are based in the Guangdong area in south-east China approximately 1,000 km from the epicenter of the virus in Wuhan. It is, of course, difficult to predict the future outcome of the virus outbreak. However, we know that it will take some time before the Chinese manufacturers reach full production capacity due to the prolonged Chinese New Year and the gradual ramp up in production, which could lead to certain accrual effects for us.

Continued strengthening of the organization
During the quarter, our new Chief Marketing Officer, Fredrik Kjellberg, and our new Chief Financial Officer, Mats Juhl, have joined MIPS. Fredrik Kjellberg comes from the winter sport brand Atomic where he had a similar role. We have also continued the work with strengthening our sales and marketing organization particularly focusing on the Moto and Safety helmet categories.

During the first quarter 2020, we relocated to new office premises in Täby outside of Stockholm. This is an important step to be able to expand our capacity in terms of testing and product development but it’s also necessary in light of our growing organization.

With our current customer base and our newly launched strategic initiatives, I believe MIPS is in a good position to deliver in accordance with our 2025 targets.

Max Strandwitz
President and CEO