MIPS AB (publ) (MIPS.ST) Q3 2026 Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Mips Interim Report Q3 2026 Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Alternatively, you may submit your question via the webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Max Strandwitz, CEO. Please go ahead.

Max Strandwitz: Thank you, operator, and good morning, everyone. My name is Max Strandwitz, and I am the CEO of Mips. With me today, we also have our CFO, Karin Rosenthal, and we will take you through Mips' interim report for the third quarter of 2026. If we start with the key highlights of the quarter, it was a strong quarter that really validates our strategy. We saw strong sales development with 59% growth in the quarter. If we adjust for acquisitions and FX, we had an organic growth of 24%. If we look at the year-to-date number, we see a net sales growth of 65% with an organic growth of 31%, which is also very much in line with our long-term ambition. We saw that the momentum was broad-based across all the categories and geographies. Europe and North America continued to develop strongly, while Asia continued its positive trend, as we have also seen last quarter. We see good demand for the recent acquisition, Koroyd, and its products. We have some new product launches reinforce the customers' interest in deepening their collaboration. The management team has been further strengthened through the recruitment of a new CFO, Marie Björklund, that will start in January, and we have also recruited a Chief Commercial Officer, Céline Flach, that will also start in January. CCO is a new role, or newly created role, and we are excited to explore also the opportunities there. We have already communicated that we reached a settlement July 2nd regarding the legal dispute in the U.S. We did recognize the cost in the quarter, and that's the difference that you see versus reported EBIT and adjusted EBIT. We see a good improvement in underlying profitability, a strong testimony of the scalable business model, and we remain confident in our long-term strategy and our financial targets. In Sport, we saw good development. It was a good quarter with 37% net sales growth. Adjusting for acquisition and FX, organic growth was 22%. Europe delivered solid growth, while the U.S. market showed positive development despite softer market condition. In Asia, the positive trend continue. It's good to see that we now have really strong performance with growth in bike for the 12th consecutive quarter in bike, which is, of course, fantastic and probably unmatched to see in our industry. I think also with that, having reported 3 consecutive years of quarterly growth in the bike segment, we can now call the COVID unwind effects over. We see quite positive industry data from Germany. If we look at the number of bikes being sold in Germany, it is actually up 10% versus previous year. For us, we continue to see Germany as a very strong engine for growth in Europe. Of course, the latest retail data that we see support that, and that is something that we also expect to continue. With the good development we see in Europe for bikes, in the U.S. market, and also the positive development in Asia, we expect also the outlook to be quite positive and our opportunities to continue to generate growth in the sports category. In Moto, we see that the category continues to accelerate. We had good performance in the quarter with 116% growth. Adjusting for acquisition and FX, organic net sales grew with 46% in the quarter. Year-to-date is now at 74% with an organic growth of 35%. We continue to see good development both in the off-road and the on-road subcategory. It is good to see for the first time that also in absolute terms, the on-road subcategory actually outgrew the motocross category. Really good to see that all the effects and initiatives that we have done within the on-road category is now starting to pay off. No change to the long-term outlook. We have a good opportunity to continue to grow in the category. You also see a picture of Jeffrey Herlings, who also won the MXGP World Tour and became world champion. We also have another member of the Mips athlete team who won the SMX series in the U.S., Jorge Prado. Really good performance of the athletes that we have in our athlete team in the motocross category. If we look at safety, we see, of course, that the Koroyd acquisition accelerates the growth that we see in safety. We really have strong increased momentum with a growth of 396%. Of course, if we adjust for acquisition and FX, the organic growth was 34% in the quarter. We did, together with Studson, launch the new SHK-2 industrial safety helmet. The SHK-2 helmet is the development of the very successful SHK-1 helmet that has been extremely successful on the U.S. market. The SHK-2 helmet focused a lot on thermal regulation and, of course, thermal comfort and fit for the user. It was launched during September and has been really well received on the market. The other thing that is unique is this is, of course, Studson's first helmet, which only has a full interior of the Koroyd solution. The previous one had, of course, both Koroyd and EPS. Really good to see that we have great ventilation in the helmet and of course, a full Koroyd implementation. We remain very excited about the category. No change in the long-term outlook, and we see a good opportunity to continue to grow in the category. During the quarter, we have also increased our investment in Quin. In conjunction with our original investment, we obtained an option to purchase another 5% at the predetermined valuation. We did exercise our option to acquire an additional 5%, which moves the Mips ownership from 25%-30%. For us, real world user data is a key component in our leadership in advanced helmet product development, complementing our already existing world-leading capabilities, both when it comes to computer simulation, but also, of course, complementing our state of the art test lab. With combining Mips test facility with real-life data, of course, we can create an ecosystem of data, which is very difficult to match in our industry. I believe the one that has access to the best data can take the best decision. Really excited about that investment. If we then look at the development in our different categories. In sport, we saw 37% growth in the quarter, 22% organic. If we look at year-to-date, the organic growth number in sport is 30%, so really solid growth there. In moto, we saw 116% net sales growth, 46% organic. If we look at the year-to-date organic growth number, we are at 35%. Really strong growth in that category also, and it is accelerating, as I already said. In safety, we are growing really fast and really excited about the new launch of the SHK-2 helmet. We had an ambition of reaching SEK 100 million for the year in the safety category, and we are already at SEK 77 million. I think we have a very good chance of getting to the SEK 100 million milestone. With that, I hand over to Karin.

Karin Rosenthal: Good morning. I am Karin Rosenthal, CFO of Mips, and I will take you through the financial part of the presentation. We saw good development in the third quarter with an increase in net sales of 59%. The Koroyd acquisition contributed with 30%, and FX had a positive effect of 6%, leading to a net sales increase of 24% organically. Gross profit increased with 55%, and we saw a gross margin of 72.3% versus 74.2% last year. We saw good underlying improvement in profitability. Adjusted EBIT increased with 70%, and we saw an adjusted EBIT margin of 45.2% versus 42.1% last year. OPEX, including other operating expenses, was impacted by legal cost of SEK 37 million in the quarter versus SEK 13 million last year, whereof the settlement cost was SEK 32 million. We had good operating cash flow of SEK 48 million. If we look at the financial KPIs, 24% organic growth, 45% adjusted EBIT margin, and operating cash flow of SEK 48 million. If we then look at the development for the first 9 months, we saw good development with an increase in net sales of 55%. Koroyd contributed with 26% growth and adjusted for that and a negative FX on 2%, net sales increased 31% organically. Gross profit increased by 53% and we saw a gross margin of 72.7% versus 73.6% last year. We also saw a good underlying improvement in profitability. Adjusted EBIT increased by 76%, with an adjusted EBIT margin of 42.7% versus 37.5% last year. OPEX, including other operating expenses, was impacted by legal cost of SEK 56 million year-to-date, whereof the settlement cost was SEK 32 million. Operating cash flow for the first 9 months was SEK 128 million. Looking at the financial KPIs, 31% organic growth, 43% adjusted EBIT margin, and operating cash flow of SEK 128 million. If we then look at the balance sheet and cash flow, we have cash and cash equivalents of SEK 141 million. We paid out dividend of SEK 66 million in April, corresponding to 55% of net earnings. Since the acquisition of Koroyd last year, we have a revolving credit facility, and that is utilized of SEK 230 million at the end of September. Net debt versus adjusted EBITDA amounted to 0.3x at the end of September. Operating cash flow in the quarter amounted to SEK 48 million. With that, I hand over to Max.

Max Strandwitz: Thank you, Karin. If we then summarize the quarter, it was a strong sales development with 59% growth in the quarter, organic growth at 24%. If we look at the year-to-date, we are at 31% organic growth, so well in line with the ambition. Momentum was broad-based across all the categories and geographies. We did gain market share in all our markets. The integration of Koroyd is working really well. The management team has been strengthened through the recruitment of a new CFO and appointment of a CCO. Both of them, of course, will start in January. Good underlying improvement in profitability. Adjusted EBIT in the quarter was 45%, and we remain positive on our long-term outlook and the delivery of our financial targets. I also want to send a big thank you to Karin. This will be your last quarter, of course. You have been with us for 24 consecutive quarterly reports. Of course, fantastic, well done and so on, and it has been a pleasure having you on board. With that, I open up for questions.

Operator: Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. If you wish to ask a question via the webcast, please type it into the box and click submit. We are now going to take our first question. This question comes from Adela Dashian from Jefferies. Please go ahead.

Adela Dashian: Good morning, Max and Karin. A few questions from me. Firstly, just on the organic growth that you reported during the quarter, 24%, it was somewhat below expectations. Was it in line with your expectations or are we reaching some sort of, I don't want to say normalization because I know that answer is going to be no, but did you expect a little bit more on the organic growth level?

Max Strandwitz: Yeah, long term, we are expecting 30% organic growth, and you will see ups and downs. Last quarter, we had 42%; this quarter, 24%. So that, of course, when you are a fast growing company like Mips, you will see fluctuations like that. That's normal, I would say, and something we have always seen. I would say that the Mips performance was a little bit lower than expectations, but at the same time, the Koroyd performance was a little bit better than expectations. Actually, if you look against consensus, we were spot on. I think you have swings both ways. I don't see anything in the quarter that expect us to have a normalization rate of 24%. We are still quite confident on our ability to deliver more than 30% organic growth, which is also in line with our long-term target. So nothing in the quarter. We had a little bit tougher comparator in Europe. If you remember last year, we grew actually 80% organic in Europe last year, and of course, that's quite a tough comparator to meet.

Adela Dashian: Right. That's clear. Thank you, Max. Then moving on to safety. I believe there's been new standards in the U.S. related to Type 1 and Type 2 helmets introducing new designations. Is this something that could drive meaningful revenue for you there?

Max Strandwitz: Yeah, there is, of course, the new ANSI standard, which I think is the one that you refer to. Of course, have a much clearer definition on what the Type 1 helmet and a Type 2 helmet is, but also putting a lot more requirements on what the helmet actually should be able to do, and so on. Of course, as soon as there is any improvement in terms of regulation and standards, normally you see bigger demand for a better quality helmet. And of course, the new standard as such helps that or supports that. Then in terms of Koroyd, of course, they will probably have a little bit of a positive effect for that because there is a demand for better helmet. When it comes to introducing rotation in the standard, that has not yet happened. But you see in the standard, there is actually a paragraph saying that they are looking into rotation. And of course, when that will be announced, then of course it will be a bigger impact from Mips. But for sure, it's a step in the right direction. Short term, good for Koroyd. Longer term, I expect also positive development for Mips in that category when it comes to rotational standards.

Adela Dashian: Great. Thank you. On profitability, as you say, better than expected here, despite the gross margin decline. Was all of that related to Koroyd, the mix?

Max Strandwitz: Yeah. There is an impact of course, integrating Koroyd into our numbers. The gross margin in the quarter was down with 1.9%. There is a small product mix effect also, and we also had when it comes to our revenues stemming from services, of course, we saw really strong growth in the quarter from that, and that has also a minor mix effect. So nothing that we didn't expect to come. We have a very strong margin, but of course, implementing Koroyd, which has a little bit lower margin could have that kind of mix effect.

Adela Dashian: Lastly on the settlement fee in the third quarter was slightly lower, a couple of million SEK lower than anticipated. Is this completely over and done with now? No more lingering into Q4?

Max Strandwitz: Yeah. The cost has been recognized in Q3. I think it is also important that in total the costs were SEK 37 million, but it is recognized under 2 different line items. One is under other operational income and expenses, and then you also have legal fee regarding to creating the settlement agreement, which you find under administrative expenses. So we were actually a little bit higher, but it has to do with the revaluation and the strengthening of the U.S. dollar that you saw in the end of the quarter. But on a like for like comparator, it was actually spot on what we expected.

Adela Dashian: Great. Then maybe lastly, and more importantly, congratulations, Karin. You will be missed.

Karin Rosenthal: Thank you, Adela.

Operator: Thank you. We are now going to take our next question. This one comes from Emanuel Jansson from Danske Bank. Please go ahead.

Emanuel Jansson: Yeah. Good morning Max and Karin. Hope you can hear me. Really good organic growth across all region as you mentioned, Max, and I think very few companies can match that in this environment. You have previously highlighted product development, low inventory levels in the channel and increasing market penetration as growth drivers. I wonder, is this still the right way to think about the growth or has the balance between those drivers changed?

Max Strandwitz: No, I wouldn't say that they have changed materially. The premium market, if you look at the U.S. market, has always been working really well. What we have seen and starting to see is that the lower part of the market is coming back maybe a little bit quicker than we expected. Europe, of course, driven by a lot of the performance that we see in Germany and of course with the increased momentum that we see in the German market, of course it's also easier to grow. But in the end, our growth is mainly from gained market shares and of course increasing the penetration with our customers. Of course, that journey will continue for a couple of more years.

Emanuel Jansson: Perfect. That's very clear. I think also that you highlight that you're quite, at least that's my assumption, that you're quite confident in a strong finish to the year. Is it possible to explain a bit why you think the Q4 might be seeing some stronger organic growth and what you see ahead of the 2027 bike season, for example?

Max Strandwitz: Yeah. First of all, our long-term ambition is to stay above 30%. We don't see anything in Q4 that would deviate from that. Of course, if you look at comparator and also the composition of the quarters, Q3 was a little bit tougher quarter in terms of that. But also Q4 is normally the biggest quarter of the year. Of course, with the seasonal variations, we see a much bigger quarter in Q4 versus the other quarters that we see. Then when we go into our 2027, we have the exact same ambition level to grow more than 30%. When it comes to the bike market, the European market, we expect to continue to grow quite quickly. We see especially Germany doing really well. We see that fuel prices, of course, is promoting that you leave your car at home and it promotes a lot of commuting. But we see that biking in general increasing quite a lot. Also looking at the German statistics with 10% more bikes being sold versus previous years, that supports that. A lot of brands are very bullish on the American market, and they expect it to come back already in 2027. I'm not sure. I think it will be still a little bit a challenging market, a lot of inflation on the market. We also see that the long-term interest rates are quite high and so on. Our assumption for the U.S. market, that it will basically be as it is today. If it helps us a bit, I'm super happy, but I think it's much better to be a little bit more cautious on the U.S. market and rather be surprised than plan for something which you don't have control of anyway. Then, of course, you have Asian market, which actually bounced back a lot earlier than we expected. Chinese consumer market has been a little bit depressed through the years, but we still see, of course, great opportunities to grow, and the Asian market has been stronger than we expected throughout this year, and we also expect it to be quite strong during next year.

Emanuel Jansson: Perfect. Thank you. Looking at safety, your full year indications implies around SEK 20 million in turnover from the safety segment in order to reach your ambition for the full year, which is then below the SEK 30 million delivered in Q3. Given the demand we have seen, for example, within Studson and Koroyd-equipped helmets, is there anything in seasonality or shipping timing that would explain that step down? Or is there room to exceed the indication or ambition for the full year?

Max Strandwitz: Yeah, I think first of all, we should start by delivering the 100 million. But in terms of historic level, Q4 has normally been the biggest quarter in safety of the year.

Emanuel Jansson: All right. Perfect. That's great. Looking at Q4 on the cost base, I think you are moving into a new headquarters, right? Is there anything we should bear in mind when it comes to the cost base?

Max Strandwitz: Yeah, you will have a little bit of cost relating to the move. We are moving on December 1st to a new facility, but we talk about a few SEK million and not more dramatic than that. Yes, you will have some cost relating to that, but nothing that is substantial or that material, but a few SEK million is good to add into the assumption for Q4.

Emanuel Jansson: Great. Thank you. That's very clear. Before I hand back, Karin, thank you for all the help over the years and all the best for your next chapter. Thank you very much.

Karin Rosenthal: Thank you.

Operator: Thank you. We are now going to take our next question. This one is from Gustav Hagéus from SEB. Please go ahead.

Gustav Hagéus: Good morning, guys. Thanks. Take my questions. Great to be back. Sorry to hear that once I come back, you leave, Karin, but I reiterate the other speakers, you've been great here. Thank them. I'm sure you're going to do great on your future endeavors as well. I have a question, and sorry if you brought this up, but on the gross margin here, that was down, let's say, 2 percentage points. You referenced Koroyd and product mix, but as we model this going forward, is this a good base to assume the new Mips is? Also, as Koroyd continues to grow, it'd be interesting to hear if you think that Koroyd commands the same level OpEx to sales as classic Mips, or is there a dynamic there that could impact me somehow?

Max Strandwitz: Thank you, Gustav, and welcome back. Good to have you back. When it comes to the gross margin, of course, our long-term ambition has always been to be above 70%, and we are above 70%. We expect that also going forward with Koroyd, that we should be able to defend that position. I think in terms of the year-to-date development, we are down 90 basis points. For the quarter, we are down around 190 basis points, but still a very healthy margin. But of course, there is a bit of product mix effect from including Koroyd into that number. When it comes to our overall SG&A and support model, of course, we like the Mips model. We think it's quite straightforward. We have 2 things which we are investing quite a lot in. One is that we want to spend 5% when it comes to R&D. I believe that great companies do that, and of course, we have no other ambition when it comes to Koroyd. There you can assume something similar. Then, of course, marketing, when you build a brand, you need to invest behind the brand, and there we want to do 7%. So surprise, very similar to the structure that we have in Mips. It will take some time to get into that model because, of course, Koroyd is still quite a small business, and adding functions can sometimes have a little bit more dramatic effect because as you invest and so on. But over time, we expect it to have the same type of cost base and cost ratios that you see in Mips.

Gustav Hagéus: Okay. That's very clear. For Koroyd and specifically going into Q4 next, do you expect the growth to continue a similar pace as we saw in Q3? Are there any effects here that we should be mindful of? Number 2, just to be clear, you referenced product mix impacting your gross margin, but is there any price adjustments of older models or something that plays a part here too, or have been seen?

Max Strandwitz: Yeah, we can start with your last question first, which is, of course, we don't see any price adjustments. We haven't done any price adjustments as such. So what you see is more a product mix effect than nothing on cost or on price adjustments as such. When it comes to the momentum we see with the Koroyd business, we have expected them to grow with around 15%, which has been the historic growth number, and so on, and we really wanted to defend that. If you look at the last quarter, of course, the momentum has been a little bit better than that, and we see no reason why it should start decreasing again. Really good demand for the product. We see also in the safety category, and especially with the launch of the new SHK-2 helmet, we are quite optimistic of the future growth capabilities also of Koroyd. No change in terms of what we're seeing at the moment.

Gustav Hagéus: That is very clear. Thank you.

Operator: Thank you. We are now going to take our next question. This one comes from Daniel Thorsson from ABG Sundal Collier. Please go ahead.

Daniel Thorsson: Yes. Thank you very much. Also thank you, Karin, for the time here, and very helpful. First one on Koroyd, SEK 40 million sales in Q3. What was the growth rate of that year-over-year?

Max Strandwitz: We have not reported the quarterly growth rate because, since they did not have quarterly reporting, it is very difficult to divide that into quarterly buckets. Of course, it has not been audited, so that is why we refrain from having really deep quarterly reporting. We saw that Q3 was at least stronger than the 15% that we expected to see for the full year. So it was a bit better momentum without referring audited numbers as such.

Daniel Thorsson: Okay, that's clear. That's good enough. Secondly, on the Studson helmet that you mentioned here, is there a reason for why it's not including Mips at this stage? Is it also a reasonable possibility in the future for this helmet, among others, to include Mips, for example?

Max Strandwitz: Yeah. First of all, of course, this helmet has been developed in the last 2, 3 years, before the Mips acquisition. Whether it will be included in the future, of course, that's up to the customers. We have active dialogue with most partners in the industry, and we see Mips as a very relevant component in every helmet. But if it will be included in this helmet, it's still too early to say.

Daniel Thorsson: Okay. Thank you. Final one on Quin. What sales level is Quin roughly at now? Do you have more options to acquire more stake in the future?

Max Strandwitz: Yeah. What we did with Quin as a company, as you remember, they used to sell their own helmets, and then they were also developing the sensor technology. So over the last years, we have restructured the company, and we have shut down the whole helmet development, all the own selling of helmets. So now it's a pure ingredient brand, which, of course, made them lose a little bit of net sales and so on. Now the sales is a couple of millions, and it has gone into profitable territory. That's what I can comment on the performance. We don't have any more options, and like we always do, we constantly evaluate where we put our money in the best way. And we like the development that we see with Quin. We could explore those opportunities going forward, but there is nothing planned at the moment, and there is no other option to call for at the moment.

Daniel Thorsson: Okay, very clear. Thank you very much.

Max Strandwitz: Thank you, Daniel.

Operator: Thank you. There seems to be no further questions via the phone. I will hand back to Max for written questions.

Max Strandwitz: Yes. I think most of the questions that we have seen, we also get some questions regarding gross margin. I believe that we have answered that. Then we also got some question on project revenues, which is increasing quite quickly in the quarter. Yes, we do see a lot of projects. It is also inclusion, of course, of the Koroyd business. Like we said before, we need to recruit a lot of people to manage the growth that we are seeing, and especially the inflow of projects and so on. The increase of revenue that you see is a combination of increased momentum when it comes to project services, but it is also the inclusion of Koroyd. Then we get a question on, you say that tougher standards are pushing more brands partner to you. How many new motorcycle helmet projects and brand agreements did you sign this year compared to last? That is not something that we have communicated, but we do see a bigger interest, of course. We see that a lot of the standards that are coming up now is a lot tougher, especially when it comes to competition level. There is a new standard called FIM 02, which is used for both MotoGP and MXGP, which is, of course, a very challenging standard. Of course, a lot brands comes to us because they want to have that collaboration. Then we also get a question when it comes, do you still plan to create the Mips and Koroyd solution for 2027? Yes, of course, we want to have a much more integrated solution on Mips and Koroyd, and the plan is still to release that during 2027. With that, I do not have any more questions. Thank you all for listening in. Thank you, Karin, again, and speak to you again next quarter.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.