Earnings Call: Q1 2024

May 8, 2024

Good day, ladies and gentlemen, and on behalf of Montega, a warm welcome to today's earnings call of the Knaus Tabbert AG, following the publication of the first quarter figures of 2024. We are delighted to welcome the CEO, Wolfgang Speck, who will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to a Q&A session in which you will be allowed to ask your questions directly to the management. We are looking forward to the results, and having said this, I hand over to you, Mr. Speck. Yeah, thank you very much, and I also would like to welcome you to our reporting on the occasion of today's publication of the figures for the first quarter of 2024. Ladies and gentlemen, this morning we published our financial statements for the first quarter of 2024, and from my point of view, the reported figures speak for themselves. Knaus Tabbert remains on course for growth and the German caravaning industry, by far the most important European market, can look back on a good start to the year. Between January and March, a total of 24,835 leisure vehicles were newly registered in Germany, which corresponds to an increase of around 4.5% compared to the same period last year. With 19,805 new registrations or an increase of 7.2%, the motorhome segment achieved a new record for the first quarter of the year. In the same period, 5,030 new caravans were registered, which corresponds to a drop of 4.9% compared to the previous year. This development was to be expected as more and more people interested in caravaning are deciding to buy motorized vehicles. This trend has been recognizable for years when looking at the registration statistics. Our Knaus, Weinsberg, and Morelo brands continue to occupy top positions in terms of new registrations of motorized vehicles. In the most important segment of the so-called semi-integrated motorhomes, Knaus with 14.5% and Weinsberg with 11.4% take first and second place for new registrations. The continued good demand is also reflected in today's press release. We are also able to report a positive development in both revenue and EBITDA. Ladies and gentlemen, when reporting on the 2023 financial year, I already focused on the expected normalization in my presentation. In the course of this normalization, the industry is now showing the behavioral patterns that have been familiar for years. New models are only presented shortly before the model year change in June. Prices are announced for the first time at this time, and dealers place their orders for the new model year at the Knaus Tabbert Dealer Conference at the change of model year. This means that we can once again precisely control the transition from the old to the new model year in the factories during the summer break. As expected, we see today the scope of the order backlog similar to the situation before the pandemic. The order backlog of EUR 621 million as at March 31st only includes orders for vehicles from the 2024 model year, which ends at the end of July 2024. We will open our order book for 2025 model year for our dealers at the Knaus Tabbert Dealer Conference in June 2024, where, by the way, more than 1,000 people will participate for one week. Ladies and gentlemen, both revenue and adjusted EBITDA are new best figures for a first quarter, plus 2.2% sales growth to EUR 376.7 million and an adjusted EBITDA of EUR 38.8 million. With an adjusted EBITDA margin of 10.3% after 8.9% in the previous year, we have once again demonstrated Knaus Tabbert's potential. But now let's take a closer look at the key elements of this milestone success. The continued stable delivery situation for chassis enabled a further change in the product mix towards higher priced motorhomes and campervans. This has significantly supported sales growth despite a slightly lower number of units delivered. As a result, motorized vehicles, so we talk about motorhomes and campervans, accounted for 81% of total sales, last year, 77%, or EUR 376.7 million in the first quarter. The sale of caravans contributed only 19%, and we saw last year 23% to total sales. Dear ladies, dear gentlemen, both the premium and luxury segments continued to contribute to our success in the first quarter of 2024. At EUR 327.7 million, sales revenue in the premium segment in the first quarter was up 1.4% on the previous year. A total of 7,431 units sold are attributable to the premium segment, and the segment's EBITDA totaled EUR 31.1 million, 17% above the previous year figure. In the luxury segment, Knaus Tabbert recorded sales of 157 units. Revenue increased by 27.6% to EUR 49 million. At EUR 7 million, EBITDA in the luxury segment was 12.9% higher than in the previous year. Ladies and gentlemen, cash flow from operating activities totaled EUR 6 million at the end of the first quarter of 2024. The negative change in working capital of EUR 33.4 million was mainly due to an increase in trade receivables. Normalization of processes at trading companies with regard to sufficient financing lines and optimization of dealer inventories, which have not yet been completed, will lead to a temporary increase here, which will re-normalize again beginning in May. At EUR 4.9 million, cash flow from investing activities was significantly lower than the previous year figure of EUR 9.9 million. Payments mainly related to the planned investments in the second production line in Schlüsselfeld, near Morelo for the luxury segment. Overall, Knaus Tabbert achieved a positive free cash flow at the end of the first quarter, and we intend to release further liquid funds in the course of the year with a planned optimization of working capital items as already announced. As at the balance sheet date of March 31, 2023, both the equity ratio and the ratio of total net debt to EBITDA were within the target figures agreed with the syndicated loan banks. Yeah, some words on the outlook, which brings us to the last slide, ladies and gentlemen. Based on the current business performance, we confirm the forecast published on March 28, 2024. To be more specific, again, for the 2024 financial year, we expect group revenue to develop in a range of EUR 1.4 billion-EUR 1.55 billion, and earnings power expressed in terms of adjusted EBITDA and adjusted EBITDA margin is expected to be in a range of 8%-9% based on the expected revenue development. Thank you very much for today's call and, more than happy to answer your questions. Thank you. Thank you very much, Mr. Speck, for your presentation. We will now move on to the Q&A session. For a dynamic conversation, we kindly ask you to ask your questions in person via audio line. To do so, click on the Raise Your Hand button, and if you have dialed in by phone, please use the key combination star nine followed by star six. If you do not have the opportunity to speak freely today, you can also place your questions in our chat box. We already got some questions, some raised hands. The first question will come from Martha Ford. Please, your line is open. Hi. Good morning. You obviously had a very impressive margin expansion year on year. Could you talk about the drivers behind that? Is it mainly mix? What's driving the deceleration in margin that's implied in your guidance throughout the year? Thank you. Martha. Thank you for having you on the phone. Margin expansion, yes. I mean, you asked a question then you gave already yourself the explanation. Yes, indeed, it's mainly also driven by the change in product mix. You saw that even compared to last year where we already focused more on the motorized segment of vehicles, even this year we made another move towards that direction. That's one topic. Secondly, when you compare that what we delivered at double-digit EBITDA margin was slightly above 10%, and you compare that with our guidance for the coming year, you have to take into consideration that we are ahead of a Q2 quarter where we see specifically in Germany, and then we look to the month of May with a lot of public holidays, so less working days. We have the summer break in the third quarter and the winter break in quarter number four. This is a little bit the reason, but this is what I explain always. This is a pattern based on just purely working days per month or working days backward, which leads from the today's point of view, to that guidance we gave. Secondly, I also explained that in the last calls, we would like to stay, when we give the guidance, on the safe side. Okay. Thank you very much. Thank you. The next question will come from Tim Kruse. Tim, please go ahead. Now your line is open. Yeah. Thanks. Can you hear me? We can hear you. Yes. Yeah. Excellent. Thank you, Wolfgang, for the presentation. I have to follow up on Martha's question a bit. Completely understood with the efficiency going down due to holidays in the coming quarters. I gather one of the strong drivers for profitability was the strong performance of Morelo in Q1. Given that their production line will probably ramp up over the year, is it fair to assume that their growth will be stronger than the overall growth of the group? As a first question. Yes, you can expect that we have the ramp-up curve for the Morelo additional production capacities this year. This year you will of course not see a full year effect, since we are still in the phase where we install machinery and stuff like that. Plus, we will also have a change in model policy this year in Morelo. Yes, you can expect that also Morelo will deliver this year a nice growth story. This is not the effect. They will not contribute with a specific effect this year 2024 already coming from this additional capacity we are investing now. Okay. Maybe, Wolfgang, to be very frank in terms of, I think, your valuation, obviously there's still a lot of skeptics around your development in the coming quarters, right? Could you maybe just shed some light on your order book? It's gone down in Q1, but there's definitely some normal seasonal effects there. Can you just give us a bit of light in terms of the normal seasonality of the order book development, we were going to a more normal phase now back again, and what you expect in the coming quarters. Maybe to reassure the market there a bit on that. I think that's the big elephant in the room, to be honest. Yeah. It's easy to calculate, Tim. You saw the results of the first quarter. I again gave the guidance for the full year 2024. It's just an easy calculation of what you can expect for the coming three quarters. That's one point I would like to make. From our point of view today, there's no doubt that we are able to deliver that. A word to the order book. Yes, of course, when you compare that to what we reported during the last one to two years, where we increased order book up to EUR 1.5 billion, then it seems a little bit strange that we are now meanwhile down to EUR 600 million. But, again, a word on that. The strong increase of the order book of the level of orders was mainly driven by the missing capability of chassis. We had an order intake in the normal intake flow, but we had not been able to deliver that output. With other words, the increasing level of order book was mainly driven by the lack of chassis and the lack of production output. That was what you saw during the years before we changed our chassis strategy. Also it's fair to repeat that, we saw ahead of COVID an average age of our orders in the order book of three to four months. After COVID, and when we had that problem with the chassis deliveries, that increased up to more than 15 months. We had customers, and more than one, we had thousands of customer waiting for more than two years, for their vehicles they ordered at our dealers. This was a situation, nobody was happy. We had another problem. Of course, our company, and I would say all competitors are working like that. We change model year more or less in the middle of the calendar year. We invite our dealers normally during the late spring times or in June, presenting new models and also presenting new prices as a main base for receiving orders. In the past, we had the situation that the order book was filled with old orders and our production was busy. Even presenting new models, we had not been able to produce these new models presented to the dealers then in the coming months. With other words, we had years where we produced a full year, the old model year, while we already presented a new one, and then suddenly the next dealer days had been there. This was something which really disturbed the whole system of order book, changing model year, receiving new orders for the new model year, and bringing them to the production planning. Now again, we are back in this normal pattern, which helps us a lot in production planning. With other words, we feel still very comfortable with that level of orders we have. You can expect when we have our first half year reporting then in July, that you will see that a couple of thousands orders will be added then to our order book based on the new model year, plus a word on the new brand. This new brand will be presented in the second half of the year. This also will be presented just in a, I would say, little bit in a more or less abstract shape already in the dealers days. Also, this will contribute to an increasing order book then beginning also in Q3 and Q4. Excellent, Wolfgang. Thank you for clarifying that, and all the best. Thank you, Tim. Thank you. Thank you, Tim. The next question will come from Alice Eckland. Alice, your line is open. Yes. Good morning, Wolfgang. Thanks for taking my question. Martha and Tim seemed to cover a lot of topics I had to discuss with you. I will just go to one I have open left, just going back to the margin again. You had a sizable uptick at the gross margin for the quarter, and just like to hear your thoughts on how we should consider that going forward for the rest of the year. Yeah. Alice, thank you for asking me that. I only can repeat what I already explained to Martha. We have, and this is something which happened in the past, and you can expect that to happen also in the coming years, that we have quarters which are not on an equal level of output due to several effects, mainly driven by the different numbers of working days. That is mainly the reason why we will for sure report in Q2, from today's point of view, a slightly lower EBITDA margin compared what we delivered now in the first quarter. At the end, it's a simple calculation. We still stick with our guidance between 8%-9%. We are also, and that is also the point I made by talking to Martha, that we would like to stay on the safe side. This is the reason why we are a little bit more defensive on announcing higher expectations on growth and specifically on EBITDA margin. Nevertheless, also a little word on the multi-year plan. We stick to our EUR 2 billion target in top line growth. We stick to our full year EBITDA margin of double-digit EBITDA margin. This is something which for sure, and I'm really convinced that we are able to deliver that in the coming, I would say one to two years, 2025, 2026, we will see. But at the end, you have our multi-year plan guidance, and this is what I also can confirm this year. We have really also nice basic datas, not only from the caravanning industry, but also when you look to the German economy, we see the production output in Germany a plus of 2.1% with the— see inflation is down to 2.2%, which is the lowest value we see, the lowest figure since April 2021. We see that people are willing to spend monies, and interest rates are also expected to be lowered, by the ECB, maybe by a quarter point down to 3.75%. We had a very nice start when we talk about caravanning, to the first quarter of 2024. Talking more specific on April, we saw 21.1% plus in registration compared to last year. That means with 9,119 registrations in the first four months. This is an all-time high since last five years. This is what the new year 2024 delivered during the first four months. When we look, that was April, and when we look to the first quarter, we saw 11.8% increase by roughly 29,000 units. All this is an all-time high. Motorhomes, talking about motorhomes. When I have a look to the towables, to the caravans, it is a plus in the last 12 months, 7.1. We see in April, we saw in April 25% plus in registrations, and also the first quarter, a plus of 2.7%. This is something where we see the market is in a good shape. By the way, also, this is not our market, but just to see in the context, even the U.S. market, in the first quarter increased by 9.3%. We see red, green lights on all signals. Also I had an article yesterday in the German newspapers talking a little bit, not on vehicles, but more on vacations. Also we see that the volume of touristic overnights in the caravaning segment, we saw 42.3 million. That means 5.2% more than last year. This is also an all-time high. Specifically in the segment of camping, we saw this 18.2%, even more than the normal hotel overnight figures. Also this, we see that when I talk about the big mega trends, we see that we have a lot of information which delivers the proof of what I'm always talking about, the baby boomers, about the trend towards touristic, domestic tourism, about the young people interested in then type of vacation. Just to deliver some more information to that point, also to the market, why we are confident that we can keep that positive momentum also for the coming year and also for the coming years behind 2024. Alice. Okay, thank you. Sorry for giving a long answer to your short question. Yeah, no. I appreciate the added color for sure and also for re-clarifying the margin, because I wasn't sure if the holiday effect was also visible at the gross margin level. So thank you, and I look forward to seeing you later in the year. Thank you very much, Alice Eckland. Thank you, Alice. A quick reminder, if you would like to ask a question, please raise your virtual hand or place it in the chat box. The next question will come from someone dialed in by phone. The number ends with 809. Please state your name. Your line is open. Hello? Hello, can you hear me? Yes, we can hear you. Okay. Sorry, I had to unmute myself with a combination. This is Miro Zuzak speaking from JMS Invest. Hi, Miro. Hi, Jörg. Hi. Thank you for taking my questions. I have one question. I noticed that you said that before, that you wouldn't give us any detailed numbers again on the order intake in units. Can you give us at least the split of motorized vehicles in the backlog, which you did in the full year and in Q3? I think it was 55% at the end of 2023. We have to double-check that. Give me a second. We have roughly, and we can confirm that number, 50%-55%, measured in EUR, based in the order book. Okay. Thank you. From the triangle between order backlog, the delta and order backlog and your turnover, I calculated the order intake. Q1 to 52 million. Which obviously is probably related to destocking in the dealer inventories. Two questions. Can you say something about the inventories levels that you can see with the dealers and whether this destocking or when this destocking will come to an end? Secondly, maybe can you say something about the order intake in April already as we are in May? Yeah. Again, let me start answering the last question just to make it more specific. We are definitely not accepting any new orders for the time being, since we would like to change the model year in production, with eating up the order book we have for the model year 2024. This is our strategy. Secondly, this is a point I would like to add, we are still in negotiations with some suppliers, in pricing. Also this leads to a situation that we say, before we have not a clear view on that, what we can expect, also, of course, we try to end up with better conditions. First of all, we would like to end up with these negotiations before we finalize our pricing for the new model year 2025. It is also a reason why we so far did not fix the prices, and without prices, we are not able to open our order book. This is also one point I would like to make. Destocking. We have levels, on the dealer network, I would say also back on normality. Let me say it like that way. But to be more specific, when we look to the financing situation, so we have the utilization of the dealer credit lines, and this is something you are aware that we are able to monitor that. So when we compared months from the previous years, March 2019, we had been at 83.6%, usage of the dealer's credit lines for their stock financing. We are now March 2024 on the level of 83.7%. So more or less on the same level what we saw ahead of COVID. In COVID and after COVID, 2021, 2022, we had been down to below 50%. That was the reason why everybody ran out of stock levels, since nobody was able to produce, but everybody was interested in buying. Again, roughly 83%. The same situation we had in March 2019. What is a big different, and this is something you have to take into consideration, the dramatic growth story of Knaus Tabbert. Because when you compare our output we delivered in 2019, it was of course much lower than what we delivered last year. This was also reflected in the order book and on the stock level. Because in March 2019, we saw a dealer had been financing lines of slightly above EUR 200, EUR 220 million and used by EUR 185. Today they are financing lines in place with roughly EUR 500, and they are used with EUR 400. Why the higher usage in absolute terms? Because we doubled at least also our output during the last years, plus inflation, plus increasing prices and stuff like that. That leads to the situation. Again, I would say we are back also in patterns where you see stock level are increasing. Then we have springtime, we have the seasonality in registrations. When you would have a look to the CIVD statistics, you always see that beginning then March, April, June, Eastern season, springtime season, that registrations are increasing dramatically and hand in hand, the destocking is something you see. This is a normal seasonal patterns and nothing which is specific now for the year 2024. Okay, in April, did you already see the seasonal pickup? We see a good selling. We have very positive feedback. As you know, we have three dealers which are owned by the Knaus Tabbert Group. One in Southern Germany, B4D. We have Caravan Welt Nord in Hamburg, and we have HÜTTLrent around Frankfurt. Located in all very strong market, geographic market situations. We see that they have a really nice track record also in April by selling. I mentioned that what we see today and that leads also just to a link to the new brand. When you compare our dealer network to competitors, we see that units sold per dealer in the Knaus Tabbert network are dramatically higher when you compare that to competitors, Hymer Group and Trigano Group. When you look to Knaus Tabbert, our dealers, they sell roughly between 110 and 120 units in average. Compared to the competitors, you see 70 to 80 units. We see that we have a high level of productivity in that term in our dealer network. At the same time, we see that we have limited capacities in bringing or in fulfilling the outside demand. That is also something which leads us to the strategy of the new brand to be able to expand in numbers of dealers, our new dealer network by bringing a new brand to the market. Okay. One more question, if I may. You have, I think, announced a four-day week at least in one plant, I think. Do you expect this to continue until the end of the quarter, or was this more like an April- Yeah. This is- going into May? Yeah. Miro, thank you for asking me that because I saw when you read the headline, Knaus is introducing a four-day week pattern working schedule, then it misleads a little bit the message. Because normally when people see four days working week, they say, "Okay, they must be down to 30 hours," and they compensate for full. But that is not the case. What we did is to work the regular working time, and this is based on the contracts between unions and the employers, that we work 35 hours a week. But we divided this now not by five, but by four days, which leads to a situation that on each day, we work now 8.75 hours a day. And this is extremely helpful for our workers because we have a lot in that region where we are located. For example, I am sitting today in Jandelsbrunn looking to the Czech border, looking to the Austrian borders. We have a couple of hundred people who drive every day 50, 60, 80 kilometers one way and then in the evening back. And that makes a lot of difference if they have to drive for the same working time, just four days or five days. And that is a reason also why we said, okay, to increase the attractiveness as an employer in that region, we have to change this model. And it is a try. We give it a try with a so far very positive feedback from our people. But at the same time, yes, in the past, we worked overtime and now we said, "Okay, let us stop for the Q2 working overtime in terms of 38 instead of 35 hours. We talk a little bit of a minus of roughly 10%. But again, just by eliminating this very high level of overtime we had also during the COVID time. Okay, very clear. You basically keep the production output- Exactly but output more or less and- Exactly with less working days. What is important now and very helpful for us that we have a free Friday, and this helps us enormously to breathe. So to increase also, if necessary, our production output. This is also something which is part of our strategy to get adapted to changing demands in terms of higher demands immediately. Or we still have topics on unfinished goods, or we still are faced by missing parts delivered from China because of the Suez Canal situation. Then when we receive the missing toilets or the missing other parts, we have the free Friday now to rework on those unfinished goods. This is also something which helps a lot to get the production plan better organized. Okay, cool. Then the last question, if I may, just housekeeping. Personnel costs and depreciation, amortization, as well as financial result was all a bit up. Was there any one-off effect or is this the level that we can expect now for the rest of the year in terms of quarterly P&L charge? Yeah. Depreciation, it is the end results of our CapEx activities during the last year. We had accumulated, just looking to my slides ahead of me. Just a second. We saw roughly EUR 25 million. No, sorry, January to March. We saw roughly EUR 8.1 million, 8.2. The increase of depreciation compared to what we showed in last year, that is just easily the result of our CapEx investment activities. This is something, and when we talk about our personal costs, this is something which you can expect also for the coming month, right? There is no one-off or extraordinary topics in. Cool. Thank you very much for taking my question. I go back into the queue. Okay, Miro. Thank you very much. Thank you. It looks like you have answered all the questions, Mr. Speck, because in the meantime, we have not received any further questions. Okay. So- Time to save the time No questions arose yet, so we therefore come to an end of today's earnings call. Thank you everyone for joining and your shown interest in Knaus Tabbert. Should further questions arise at a later time, please feel free to contact Manuel Taverne from Investor Relations. A big thank you also to you, Mr. Speck, for your presentation and the time you took to answer all the questions. I wish you all a lovely remaining day, and with this, I hand over again to you, Mr. Speck, for some closing remarks. Yeah. Again, thank you very much for your interest in Knaus Tabbert and following this nice and successful story. Also, I wish everybody a nice extended weekend for those who have that public holiday tomorrow, and hope to see you soon. Thank you very much. Bye-bye.