Earnings Call: Q2 2021

Aug 24, 2021

Welcome to the Nimbus Audiocast with Teleconference Q2 2021. For the first part of this call, all participants will be in listen only mode and afterwards there will be a question and answer session. Today, I am pleased to present CEO, Jan Erik Lindstrom and CFO, Magnus Aldenmuth, please begin your meeting. Okay. A warm welcome to this event then. I don't actually see what you see. So hopefully, you see one of our lovely COPs, the 365 PP on Page 1. And I then suggest that we flip the page to Page 3. And then we start with some highlights then of the Q2 of We had probably more than a sales increase by roughly 36%. So we reached SEK656,000,000. The sales was then to a large extent by our own dealers. So we had 61% versus 41% over here. The EBITDA amounted to EUR113,000,000 And the margin was up then up to 17.3% on the last 12 months. After all these deliveries then during the quarter 2, quarter 2 is our best quarter normally, we still then have order backlog of SEK 731,000,000 compared then to SEK 864,000,000 in the Q1. But please keep in mind then that we do a lot of deliveries during the quarter 2. So this is actually on a very strong order book, but we will come back to that. The capacity restrictions are obvious, of course, and we have then done some initiatives during the spring and also during the summer. And actually it's planning for and also have done some investments in our production units, both in Sweden, Finland and Poland. And then good news then, of course. In May, we bought The Swedish dealer network main store. And if we click the page to Page number 4, which we are very happy for, they are located in a very interesting voting district. And it's actually in that way that we had no representation before in this district. So we are very happy for that. They are located around Stockholm, so it's the Swedish East Post we are talking about and of course then a lot of voting as it is in the Stockholm area in general then. 21 employees, they had a net sales 2020 of roughly SEK 330,000,000 and they are well reputed and actually then also the largest dealer in Sweden. And one good thing then for us, of course, is that today they don't have any Ningbo sales at all, none of the Ningbo's Goods Brands. And of course, we are planning then to add to the present brands to add our brands In the future, then of course, that will, of course, have a good effort on the business. The purchase price then was SEK 180,000,000 and then, of course, we paid some additional money for the cash, But of course, also it's on a net debt zero level that we are buying then. We had a net cash flow effect then of NOK 105,000,000 during the quarter because of these acquisitions. They have already now added actually then €91,000,000 to our net sales, which is, of course, very good and it's About 20% of the sales in Sweden. And Paul already mentioned then the preliminary goods will identify then to Swedish 1,177,000,000. If we then flip the page and then we will look back a little bit, it's Page 7 and sorry, Page 5. And this is done actually what we used in the II bill that we did in this year, February this year. And this is done why invest in NIMBUS We call it here a reminder. And one of the important thing is, of course, that we have a strong underlying market, And we have then also several, as we say here, fundamental drivers, and I will actually then come back to that later on. We have our 2 house of brands with a strong and distinctive brand portfolio. And already here, I mentioned that this is then, of course, for the deal that we want to be an important part of the deal. We are in an attractive position in the value chain. We see a lot of opportunities. I will mention that also a little bit later. We have our asset light and flexible production. It's about scaling up and scaling down in an efficient way. Experienced management team, definitely. And then last but not least, excellent growth Opportunities, including then the geographical expansion, and then we're talking mainly about North America for the moment. And then also consolidation, both vertical and horizontal. And then it is like that, that we are working in a very fragmented industry. It's A lot of small boat dealers, family owned and that gives us then, of course, a lot of opportunities for ourselves. But it's also like that, that the industry must we could then flip the page to 6, short about the Ningus Group. We were founded in 1968, and we have a very long history of international trade. It's actually more or less It's immediate at that time that it started with this international trade. And that was due, of course, to the fact that the Portofempa was we have our well known Scandinavian brands, we'll set them up and it's actually That's a couple of them is also globally due to have a very high brand awareness. 2012, we were, you can say, reconstructed by our new owner and still our major owner, R12. So they are a bit for a long term. 2018, we can We say that we proved the fact that we are a house of brands. At that stage, we only had 2 brands. And then we acquired Olekin. And then in 2019, we acquired Dalla Hodes and Dalla Hodes then added 4 good brands to our portfolio. In February, as I mentioned before, we were listed on the NASDAQ First North. And again then, the Proof that we won something with this journey is that we then bought MarineStor in May this year. Back then a little bit to what You said from the beginning, I already said that we want to have this House of Brands for the dealers' sake. It's important for us To be a big part of the dealers' business. And it's also like that to be able to be that, we need a couple of brands. We need them To be present in a couple of segments that fits the current voting that the dealer has around the world more or less, but it is interesting voting district. In the middle, you have this the share of the group new boat sales then. And this is no picture because From 2020, but you can say, in general, the portion is quite accurate. What you can see is that Alloqin starts from a quite low level, but they're doing very well. So they're growing. And then but mainly, if you can say that The portion is more or less the same. This fundamental driver, this is then, of course, really interesting. We have had the technical development. And important I think you said it's the boating industry itself that develops the products, which means that we are focusing on Easy boating. It should be easy to do the boating and also the water handling and things like that. So you have a less Successful journey when you're out there. And this is good because for the new boat sales, because if To compare a boat that is a couple of years old, it's quite a huge difference today between the technical level and that one and also the one that we actually produced the data. We also have an aging boat fleet. Usually, I say that if you look at Sweden, for example, 2020, 45% of the fleet was actually older than 20 years. And this is, of course, also something that needs to be updated. We have the increased popularity of staycation. And here, I also want to point out that the pandemic has, of course, Accelerated the trend, no doubt, but the vacation trend started well before the pandemic. And If you combine that with the fact that the last one, the overall wealth is increasing, we are working a lot, But then we also want to have high quality in our spare time and we are actually then also prepared to pay for it. And if you combine these two things, this is, of course, good for the recreational industry, but also one of the goals for us because we are part of that. So that was the fundamental drivers then. If we then flip the page to number 8, a little bit about the production. On the left hand, you can see where we're present today. And actually, the the biggest one is the outsourced one that we have in Poland. 400 employees. We have increased quite a lot of people in our own factories. And of course, we have also increased On the outsourced units. In the middle, this is more or less the philosophy from our part. We want to have very high portion of the cost as variable cost. Actually, we are saying that at least 75% of our cost Should be variable on 6 months' time. And this is one very important thing for us and it's about scaling up and scaling down. Production efficiency is important. We have done a couple of launches a couple of years back, for example, the new VTC series, where we worked a lot to have actually done one platform, one technical platform For a lot of different models. And this is, of course, important, that it's not only the program, it's also the process that we need to work with. If we then shift the page and then we have Page number 9, our order book. And as we say there, it's actually on record high for this time of the year. As I said, it increased, of course, from the last quarter. But then again, if we compare this quarter 2, 2021 with quarter 2, 2020, you can See that it's almost 3 times as high as it was there. And then, of course, we had some pandemic In the Q2 in 2020, that affected the order book, of course, but still, It's a good development, no doubt. Then I actually need the word to Rasmus. Yes. Thank you, Jan Erik. And I will just start mentioning that the prepayments is, As you can see, it's 40% and it's somewhat down compared to what we had in the last quarter, but that's because of That we see now that we have a very long order long term order book where only the initial prepayment has been invoiced. So that's logic. And we also see that this will normalize going forward. If we flip to Page number 10, then we see that sales in the second quarter has increased by 36 Percent to EUR 657,000,000 compared to last year. And the LTM sales amounts to EUR12.55, which is an increase by 22% compared to full year 2020 And plus 16% compared with the last quarter's LTM figures. Regarding the demand, we see growth in America And that the Nordics, including Sweden, develops well. In the quarter, 60% of the sales comes from own dealers Compared to 40% last year. And here we see a positive effect from MarineStar, as mentioned before, with SEK 91,000,000. Also worth mentioning is that the second quarter is a strong quarter in Sweden. And Because of the seasonality and that we have several own held dealers in Sweden, therefore, The Swedish market is strong in the second quarter. It's the strongest quarter. If we flip Page Number 11, please. EBITA margin continues to improve and now amounts to 9.6 percent on an LTM basis compared to 7.8% in the last quarter. The increased margins comes from higher sales volumes that gives scale advantages on mostly OpEx, But also somewhat increased gross margins. What mentioned is that Marine Store only has contributed with dealer sales margin, Manufacturing margin at this stage. In the quarter, the EBITDA results increased by 47 percent amount amounts to EUR 130,000,000 compared to last year. Flip to Page 12, please. Working capital, we see that we now have a negative net working capital So as per the Q2, that amounts to minus SEK 32,000,000. And the reason for this is mainly due to stock levels, But also that but also the acquisition of MarineStore where we acquired both cash and the trade payables. And as per the Q2, these trade payables were not yet fully paid. This will be normalized going forward. And we can expect that net working capital will actually rise a bit. But also when excluding Marine Store, we see that the net working capital is a very on a very low level compared with previous periods, which we are very satisfied with. If we flip to Page 13, This is to remind about our financial targets and compared to compare with our actual figures. First, the growth. We have said that we should have an organic growth of plus 10% of our business cycle. And that includes acquisitions of dealers, but not brands. And year to date, the organic growth is 37%. And EBITDA margin, we have said that we should reach 10% on the medium term. And now the actual LTM figure is 9 point 6%. And regarding the capital structure, we have said that we should have no senior debts, which we don't now as per the Q2, we have also said that we have also dividend policy saying that we should pay out 30% of the results, taking into account financial position of the company and cash flow, this is not a financial target that we measure today, of course. This will be a year end question. So I hand over again to Jan Erik on Page number 14. Okay. Thank you. So as we say then, an exciting journey ahead. And what we then will we should not say focus on that, but spend A lot of time on at least is then, of course, to develop our current offering and organization. We will continue then to expand and densify the dealership network in Europe and then especially, I will mention the AquaDOR and Fitra brand, which has actually Never been there. We will also then improve the aftermarket offering and presence, of course, increase the presence in North America. And I think I mentioned also the last time that North America actually is our 2nd biggest market after the home market already now. So that is, of course, good for us It's a lot of energy. And then as we more or less improve with the acquisition of Marine Store That's value acquisitions and again, the Marine Store forward integration. So that is what we see in the lead journey. Then I leave the word to Gunilla. Yes. So our next page, the ownership end of July is Pretty stable from the spring and the IPO in February. There's some increases by number 7 OP But more or less the same since earlier. So with that, we open up for questions, and I just want to remind you that our Q3 report would be on November 23. So welcome The first question comes from Gustaf Osterberg from Carnegie. Please go ahead. Your line is open. Thank you, operator, and good morning, Jan Erik Kjosten from Canilla. And congratulations on that on a great Q2 report. I have three questions. The first one is on sales mix here in Q2 2021. You were talking about the improved margins. You mentioned About the gross margin as well as volume leverage on OpEx. But is there some mix as well In the quarter, I mean, is there a higher share of larger boats in Q2 2021 compared to Q2 earlier years? Well, actually, we don't really see such difference because the market is strong on both smaller boats and larger boats in the second quarter. So in terms of mix, I would say that it is fairly stable mix Compared to full year picture. All right. Thank you very much. So most of that improvement in the margin is Driven by the production side essentially. Yes. That's correct, Nasse. That's correct. Perfect. And secondly, on the order book and the reported sales in Q2, Are there some or all sales that is reported in Q2 from the order book? Or are there some part of that sales that is Not taken from the order book. We I would say that almost all the sales comes from the order book. But of course, there might be some smaller boats at dealers that can have been there directly over there, That's the wrong unit. And then, of course, it's aftermarket sales that you don't know and you don't have any order books, as you say, when But that is the major part is, of course, both in this quarter. All right. Thank you very much. And then a final question on North America. How could you please give us a bit more color on what's Driving that sales increase, is it more or new dealerships being opened? Or is it increases in volumes on And perhaps if you could give some more color on how COVID-nineteen is impacting kind of that Expansion and plans going forward. Are we seeing an easing restrictions, etcetera? To begin, we see clearly that the current dealers is adding orders. So obviously, they are Selling good. We have added a couple of dealers. But as we say in the report, we have It sounds maybe a little bit strange, but we have a couple of dealers that wants to sell our products, but we cannot start with them because we don't have enough available boats, so then we'll get this false start as I'm talking about. So we have to do it in balance with the production capacity. As we have started 2 during this quarter, so we added 2. And then of course, they have We ordered some boat boats, but mainly it's because of the fact that they are selling more boats and more boats at the present point. And then the COVID, similar picture, I should say, as we see. Of course, it's hard to predict anything, but let's call it the vacation agenda. It's the same more or less in U. S. They they're spending money on things they can do close to their homes, so to say, and that includes boating, of course. And then if we see North American compared to Europe, Europe, we had a complete lockdown and had that really in U. S. Some states have added, but we were not affected in that way because it was not the typical boating So it's a similar picture as we have in the Nordic countries. I hope that answers your question. That's perfect. All right. There were 3 questions from me. Thank you very much. Thank you. Thank you. The next question comes from Victor Hansen from Nordea. Please go ahead. Your line is open. Hello, Joni and Rich, Rasmus and Stefan from Nordea here. I would I'll start off with if you could provide a comment on what component issues you are seeing, perhaps if you've had any trouble in the supply chain or in terms of higher input costs and if you've raised any prices. Thanks. You may? If we start with the last one, we increased the prices and we have never done that before, but we actually did that Yes, before the summer, depending on what model, of course, but you can say in general 4% to 5%. Because we saw at that stage that we had the increases in some aspects. If we look at the picture in general, we don't see anything specific. It's more or less this general picture that you have to plan your production well ahead. And we are quite used to that. I think we differ a little bit from, let's say, the smaller ones down to the smaller boat, but we have very long perspective For our production planning. So what we have seen is, of course, some delays, but it hasn't really affected the end customer because we have this well at launch, we also have work with to a greater extent with the inventory, where we have secured more of things that we see that we don't have this Perfect situation, you can say, with just in time deliveries, it is more that you had to keep some things in stock. So nothing specific, no. Then of course, the engine makers, they have had their problems, but Same there, we would have seen in the conductor term. But same there, if you plan well ahead, you can copy with the person That's promising. Thank you for that. Yes. I can imagine. I can imagine. And then a follow-up on your North American expansion, if you could help us with what are your delivery times now in the NA? And how does Defer compared to the Nordic and the European markets. You're meaning our delivery time to North America or in North America, so say from dealer to end customer or Yes. So from when you get the order to when you deliver the boat, reduce and deliver. That's a good question. 1st to start with, maybe we can mention that it is a bit different depending on models, of course, demand of different models. Some of the models we sell in U. S, which are popular there, today has a longer delivery time than what we see on Some other models. So that's one thing to consider. I should say this is not we haven't checked the fact behind it, but it really doesn't differ Between North America and Europe, but you have again, you have to plan your business. The dealers in U. S, they work slightly different from the European because in Europe, the dealer typically has an order From the end customer and then he orders the boat. In U. S, they like to have a stock. So they are more adding batches When they are putting their order to us. But the delivery timing is more or less the same. And again, exactly as Rasmus said, it's depending on which model, of course, but if you buy some of the more popular ones today, then of course, The delivery time will be somewhere around the summer next year. That's helpful. And Yes. And a few more questions. When will you have had the time to integrate and start selling your own brands For Marine Store. Well, to begin with, we want to add How are brands then? Because we will certainly not sell all the brands in the main store because they have their But we have a couple of brands that we think that will fit perfectly. And we will start that during 2022. But Again, the capacity then. So we will not have a full house during 2022. It will more likely be 2020 We will start marketing and also then sell a couple of our brands during next year. But it's important to understand that we will continue to sell brands that we sell today at the Marine Store also. So we will add, as Jan Erik mentioned, more brands to the Marine Store. And then If you could tell us how much MarineStore benefited your EBITDA in Q2. I only saw sales in your report. We have not communicated that figure actually, so in the report. So what we have only communicated is the sales, net sales figure. Then perhaps you could tell us The seasonal variation in terms of sales and if the margin how the margin varies by season? The margin over a seasonality perspective is If you're talking about the gross margin, then we would say it's fairly stable on the 12 month period. What difference is, of course, the volumes, where the dealers delivers lots many boats Because of the seasonality. So in that term, of course, the EBITDA margin is affected since we now deliver more growth In the Q2. I'm not sure if that was the answer to your question. Yes. And then a quick follow-up. So you also get some scalability on OpEx in Marine Store then? Absolutely. Okay. Absolutely, yes, for sure. It's the same as we have this is the effect is the same as we have at our Other dealers, it would be the same because the revenue comes from the open season from, let's say, April to older stores, which is the normal period in Sweden. We can tell you what affects the margin and liquidity is that they are selling the typical dealer in Sweden, for example, or in the Nordic countries. They are selling used boats to a greater extent at the end of their season July, August compared to new boats because new boats delivered a little bit earlier. But still, that's the normal picture in this year we have today is that if we use those today that we actually be able to enter Okay. Yes. Thank you very much. And a final question, and this is just to clarify. You talked about your expansion Plans in terms of production. And do you pay any CapEx to increase the production volumes within your outsourced production, such as in Poland? That would be very helpful. And no, no, we don't. Okay. That's great. That's all for me. Thank you. Thank just a reminder that if you would like to ask any final questions, please press 1 on your telephone keypad. We have no further questions. So I will pass back for any closing comments. So let Jan Erik say thank you for today. Yes. Thank you. Thank you all. And welcome back. And welcome back. We'll come back in the Q3. Yes. Okay. Bye bye. Bye bye. Thank you.