Earnings Call: Q1 2021

May 11, 2021

So welcome everyone to the Q1 of Lundberg Group. We are really proud to present this quarter. And with me is Jan Erik Lindstrom and Rasmus Albermere. So please, Jan Erik, go ahead. Okay. Hi, everyone. We'll start immediately then. Some highlights then from the Q1, and we are on Page 3, I should say then, from Q1 2021. We had the sales increase by 31.5% compared to last year, same quarter. The EBITDA amounted then to a positive SEK 5,200,000. The order book continued then to grow and reached SEK 8 154,000,000 and that is actually then plus 21% for the quarter. And I think it's worth to mention also from that respect that if we look 1 year back then when the pandemic hit us, we actually then lost more or less half of our order book at that stage. Since then, we have changed the way we measure this order book, meaning that if orders should show up in our order book today, the dealer has to have paid his prepayment. So that is the trigger actually becomes an order. And that's important to bring with you. The sales then increased to a larger extent to our own dealers, more or less doubled during the quarter. We still then face some capacity restrictions then in the supply chain. We handle it, but it is tricky, you can say, for the moment. And it has been like that since, you can say, 2nd November last year. We also see that we have some indication of price increases in the raw material side, nothing that we cannot handle, but it's a fact that we see it slowly increasing then. On the positive side then, we have contracted new dealers in U. S. And exactly as we have said before, it's important for us that we do that in balance with our capacity. And but now we feel confident then that we can start again then to add dealers in a slow speed, but still we can continue that journey. During the quarter, we also have 2 interesting launches. It's both Nimbus. It's the C8, since the boats to the success story, you can say the T8, on this year, we have had T8, we are up on 260 roughly both in order stock and delivered. And also the T9 Twin, you should say that is T8, sorry for that mistake, the T9-twenty for the North American market. Also, a fun thing then, in May, we actually then released also the Belasiro, the 100% electric boat, and you actually see it on the picture on the right hand then we flip the page. Quick reminder then, why invest in NIMBUS? And this is more or less than what we said during the IPO process. We have a strong underlying market with several fundamental drivers. I will come back to these drivers. We have our 2 house of brands with a strong and distinctive brand portfolio and already here for the dealer. We want to be an important part of the dealers business. We have an attractive position in the value chain with to further improve the dealership offering, but also then to develop the aftermarket services. We have our asset light and flexible production platform, and we have that by increasing the outsource production, but also modular development process themselves. In the boat giving process, they have a modular thinking. We have our Experience management team, I have a good team around me. And we also then see from a geographical point, excellent growth opportunities to densify in the net work and things like that, but also then to consolidate in this fragmented industry that we're actually working. If we then flip the page to number 5, actually then on the left side, the picture there, you see the launched CA. And since we don't have any good places to launch it, the boat shows is still closed. It's starting to stock up now, but it's still closed. So this is actually on a digital launch that we do during the quarter 1. I'm certain that, that will work excellent. We are founded in 1968. We have our long history of international trade and we have done our well known Scandinavian brands. In 2012, we we constructed them by our new owner at that point, R12, and they are still our main owner actually. 2018, we acquired Allotene we started the House of Brands journey. And in 2019, we acquired Bella Bennett. And then that is finished for boats, it's Bella Boats. And 2021 now in February, we actually then listed them on the NASDAQ. If we flip the stage, then I will come back to what I said in the beginning then. Today, Truehausen Brands and it's for the dealer's sake. So here is presented on our 7 brands and the typical dealer use maybe 3 to 4 brands for his business. And it's important then for us that we can actually then present a good the portfolio for the Divo. So you can depending on what boating district he is in, he can do a proper job. In the middle of the page, you have the share of the new book sales in the group 2020. And it's roughly the same figures that we see today. But there we also, as I mentioned before, we see that we can do some changes here because we wanted to see a couple of the other brands grow. And maybe I can mention for example that, we're in Flipper that sells mostly in the Nordic countries. There will not that much in Europe, but of course, they will fit European market perfectly. We know that because we have been there so long. So that's something for the future. I was talking about the fundamental drivers. If we look at the boat industry, it's of course the technical development, it's a huge difference between a newly delivered boat today and what we accidentally made for 20 years ago. And we have this 18 boat fleet, again, 45% of the Swedish boat fleet is actually then more than 20 years old. So it's of course, that has to change by the technical development and other things, of course. If we look at the big picture, the market, the industry itself, we have this increased popularity of staycation. And as I used say, please remember that this staycation trend started before the pandemic. The pandemic has, of course, pushed the development that started earlier. And maybe the most important factor that the overall wealth is increasing. We compare to year 2000 up to date, it's actually around $2,500,000 more money to spend for the average people on the markets that we work. During 2014 to 2019, the market growth has been then as an average 7%. At the same time, our organic growth has been slightly above 20%. So we have been used to beating the market have done that in the past. If we then switch to page 2 next one, I will keep it brief. But today, we are growing. And as you understand, we're building up our capacity. We are building boats in 7 locations today. 4 is on by ourselves and then 3 is outsourced. And it's roughly 3 50 people involved in the Deutsche Buchtogling process. Then we will, of course, have additional people done in the outsourced production basically. For us, it's important then to have a high variable cost. We work a lot with the time frames. So what we are saying is In 6 months' time, we will then be able to of course, we'll set a target for this, but then we will want to be able to actually then decrease the capacity, for example, or the overall costs. And we're talking about the 6 months and then we are roughly down on figure around 70 It's not only the product that is modular. It's also important for us that we are building the boat smart in the process. So it's if we click the page, dealership network with room for improvement. And of course, if you look at the Nordic picture, we have 57 dealers in the Nordics not fully covered. We still need to add some dealers in the important boating district. The Nordic countries It's a big voting district if you compare to the world actually. But we have only then 25 dealers in the rest of Europe. That's the same here. And the latest deal that we added in North America can be interesting to know that that's in the Gulf area where we actually want to reach Texas and also the Western part of the portfolio. And we are taking steps, as I said, to grow the interest in aftermarket. We have done a lot, but we still a lot to do. So that is a possibility for the future. If we then flip the page and come back then to the order book, mentioned in the beginning there that it's important to know then that to be an order in Nimbus Group, you have you have to do your prepayment. That is the trigger to actually order them when you get your production. And And the Q1 then increased 21%. We have done what we noticed is that we have done a comeback In the main markets in Europe, in Europe, they had a lockdown. So actually, we sold less both in Europe in 2020 than we did 2019. But now we can see that the market is open up again. I think this is, of course, positive for us. The U. S. Market remains strong. And as mentioned, we have added actually now new dealers again. And we have these projects launched standby Nimbus C8 and the T9 twin engine. Is there anything before I need to ask It's just Maybe, as you said, Jan Erik, to remind about this a bit of conservative approach that we use today where prepayment has to be made on the order stock, which is different compared to what we have done before. Comparing Q1 2020, we had, I can mention, the order stock of about SEK 190,000,000. So there is a huge difference today compared with a year ago. Then we flip to Page 10. And then we see that we have a strong sales in the quarter. We had an increased net sales in the Q1 by 31% compared to last year, ending up in the net sales of SEK 290,000,000 Our organic growth amounts to plus 35%, and the difference in between the net sales is currency related. We see that we have a higher share of sales through our own dealers. And this has been actually doubled compared to last year. But still, it is important to have in mind that it is a fairly low level in relation to full year sales because of the seasonality in Sweden, where most of our dealers are located our own units are located. And on a 12 month basis, we see that the sales has increased by 30.8% compared with the Q4 and now amounts to EUR 1,801,000,000. So we could flip to Page number 11, please. Then we see that also the EBITA has been improved. EBITA in the Q1 was SEK 5,200,000 compared to minus SEK 21,000,000 last year. And on a 12 month basis, EBITDA was SEK 85,000,000 Compared to 58% by the 4th quarter. The EBITA margin on a 12 month basis has increased from 7 point From 5.7% in the 4th quarter to 7.8% in this Q1 on a rolling twelve. And I can also mention that the increased margin, the EBITDA mainly comes from this higher sales volume that has been described. So if we flip to Page number 12, then we come to the working capital. And what we see here is that we had slightly higher net working capital compared to the Q4. And this is because Stock levels are higher with more boating stock, mainly at our dealers and also that we have increased our security levels in the production a bit. So the stock value has increased by SEK105 SEK 5,000,000 compared to the 4th quarter. We have compensated this by increasing the level of prepayments, And this now corresponds to SEK 158,000,000 in the Q1, which represents about 19% of the order stock value of SEK 854,000,000 that Jan Erik described earlier. Due to this, We are pleased to see that the net working capital has not increased very much in relation to the Q4 and in comparison in the Q1 2020 2019. This you see on the chart to the left, the levels. And the 3rd page, please. This is to remind you about our financial targets that we have communicated earlier. We say that we should have an organic growth of 10% per year over the business cycle, including acquisitions of dealers, But excluding acquisition of brands. And the reason for saying so is that we want to keep the mixing between own and external dealers on a quite stable level. We say that we should reach an EBITDA of 10% in the medium term and that we should have no senior debts, excluding real estate related debts. Our target is to pay out 30% of the net earnings, taking into account financial position of the company, cash flow and growth opportunities. We have also given a guidance for 2021. And I would say that we will reach a net sales Between $11.50 $12.25 $1,000,000 And this we have said because with them having in mind this strong order backlog and that there is a momentum at the market that we saw in the Q4. Then I hand over to Andreas again. Yes. And if we can flip the page, Page 14. If you look at the 2020 and onboards, What we are working with today then, it is then, of course, to develop our current offering and the organization. We spent a lot of efforts now to actually then both increase our organization but also to educate. We also then, of course, want to expand and densify the dealership network in Europe. And again, the capacity the production capacity, it is important then for us that we keep the balance there so we can do a proper start within this. We also then want to improve the aftermarket offering and the presence on the market to make us available via web shops and things like that. We have done a lot there in the year and especially than last year, of course. And that is something that we will continue to work with this year. Increased presence in North America and then value Acquisitions and the forward integration, that is important for us. And as I said, we are in the fragmented business. So we will continue to look for possibilities and interesting then I will leave the word to you, Gamila. Yes. And looking at the ownership, end of April is fairly unchanged from the IPO. So that was just a short glance of our main owners, which we're very proud of. And looking into the next page, our next quarterly report. It's on August 24, and there will be a new teleconference at that time. So please, then we will open up for questions. Thank we have a question from the line of Erik Poisson from Nordea. Please go ahead. Yes. Hello there. So first, on your supply chain problems with this, obviously not your own problem, but for the whole market. Could you say something about if it has worsened in this quarter, Q1 compared to last quarter. And also, obviously, we have discussed this a lot, But what you do to Paradis and what is the largest bottleneck for you now? Is it engine still or other parts as well? Thank you. In a way, you can say it's tricky question because as I said, we have had this and seen it since maybe October, November. Then you can say that the tricky part increased during the winter time, we can say. Today, we are on a more stable level. We have delays in the deliveries. But as we so to say, we plan our production then, we can say only then actually then order the things earlier, meaning then that we have, you can say, a safety stock that we usually doesn't have. So that's the way we handle it. Obviously, Chase guys needs to chase the suppliers a little bit more than you to secure that we will get the things in the right time. It's more calm on the Supply Chain side today than it was for maybe, you could say, 2 months ago, definitely. But it's not over yet. So we have to monitor it closely and continue to do that for a couple of more months. That's my guess. So again, it's tricky to answer. I cannot say that we are absolutely certain that it would be a problem. But as far as we can see in our planning, we handle it. So that is the picture. If we look at specifically what We stand the problem. And it's not a problem today. It was, but they have increased their capacity. We are, of Our fairly big players, so we get attention when we are doing the work together with our partners and suppliers. So the picture is more, you could say, wider today. It's more things. For example, we had steering wheels for a couple of weeks ago. So today, but we don't know, so to say, what will happen tomorrow. It may be something else then that we have to spend some time on. So it's nothing specific today that we It's a bigger problem than anything else. I hope I answered your question Correct. Great. Yes. And then maybe also on the raw materials there. What do you see there now in terms of comparison, for instance, compared to Q4 here? Yes. Same picture as the others that we have there are delays, but not More, so to say. What we see then on the raw material side is that we see a price increase, not a very high one, but it's a steady increase. So if you compare on a 6 month basis, then the prices definitely have increased. Again, we are fighting that trend because it's hard to see if it's a real price increase. So it's just something that a mechanism that starts if you compare it with the toilet papers, for example, when the pandemic started. You can see that a lot of including us is maybe having a little too high safety stock. So it's you don't see through it really. But that's the shortage for the moment. Yes. And do you see that you can raise your own prices in your boats by the same amount or more compared to the raw material increases and the other parts as well. Also a very good question. That is our target, of course, to do that. We have already done an increase. We did that Looking at your Erasmus now, we did it 3 months ago. Yes. Roughly, yes. And you can say at an average, we increased our prices 4%. And that was what we saw at that point, also with the forecast, For example, the raw materials. And for the moment, we feel We can execute them with this price increase that is relevant price increase that we did. But again then, when we change our price list, you can say August, and of course, we will monitor these Changes and that will be the next time that we do an evaluation of the market them in supply chain. And then finally, on the U. S. Market, I'm not sure if you break that down in the actual report how much of sales that is of your total sales at the moment. But You mentioned there that it increases, etcetera. But what's your ambition here for this year for the United States? It's a good question. We don't speak The way you're asking for now. Since we have this capacity, we're running all our factories on full speed. Of course, then the pandemic still affects us with the quite high level of cyclicality. But we are running at full speed. And for the moment, we are a little bit, you can say careful to add more dealers in North America because we have the feeling that we need to be more sure that we can provide them with those that's important to us. And what we said during the IPO process, what was that, of course, then from a quite low level, we want to double our presence for every year now for the next coming years. And that's still that is still the part of that. All right. Thank you very much. We measure U. S. As part of other markets, just to remind. Yes. Great. Thank we have a question from the line of Gustaf Osterberg from Carnegie. Please go ahead. Thank you, operator, and congratulations to your nimbos on a strong start to the year. I just like to follow-up on the development in North America. You mentioned you added a new dealer in the Gulf area. Is it reasonable to expect a similar sales development over time for these new dealers? Or are there meaningful regional differences here if we look at the series development over 3 to 5 years? To begin with, the North American dealer network works slightly different from the European. One big difference is that they actually keep stock. They're going to have a stock. That means that we are not really sure then, at least from the beginning, so to say, if you have an end customer. It's also that one dealer can easily then have maybe 4, 3, 4, 5, 6 locations that they work from. So one dealer could be 5 locations. This dealer, we now add our expectations from that dealer is that they will buy plus 25 boats, not as a start, of course, but that is what we think that, okay, this is a plus 25 dealer. And if they then expand as they show us then, of course, we can then add to that number these locations where It's not maybe that it's plus 25 volts on the next location. That could be a 12 volt location, whatever. But that is the expectation we have on this deal. And again, we are selective here. We are in the North American expansion is based on NIMBUS for the moment. So we will still then in the future, we will add a couple of other brands, but for now it's NIMBUS. In terms of production availability for 2021, if you're seeing new orders coming in today, will you be able to fill that in pockets in 2021 production? Or are new orders primarily directed towards 2022 currently. It's 2022, definitely. Perfect. From the boat bidding perspective, then of course, you can have a couple of boats available at the dealership somewhere in the world. But from the In the perspective, it's definitely in 2022. All right. Perfect. And a question for Rasmus Let's see. Moving on to the working capital movement here, which is you're balancing an increase in inventories and receive and prepayments with a large increase in prepayments. And you mentioned that 19% of order stock value is prepaid. Is it fair to assume that there's a similar ratio of the share of orders that are prepaid, I. E, is the prepayment larger than 20% typically? Have you covered kind of the full order Order stock with prepayments or is still room to improve here? I would say that the level that we see today, 19%, we still have some improvements to make here. But I think we are on a quite realistic level now. As I said, of course, we can improve this further. But I would say our opportunity is maybe about 25% something as a maximum, it's not realistic to go even further than that. That's what we think. And again, in fact, I don't know if we understood the question right there. But to become a part of the order Backlog, then you need to pay your prepayment. So everything you have the prepayment on in the order Yes, of course. In the order book, yes, of course, I was thinking in terms of on orders in general, if you look on a rolling 12 month basis, for instance, backwards looking. But that's very helpful. And I have no further questions right now. Thank you. There are no further questions registered. So I hand back to the speakers. There is no further questions on e mail either. So I would like to thank you all for listening in. Janiel, would you like to add a last word or 2? Yes, I can say that to begin with and of course that we're looking forward to the journey ahead of us, especially then maybe the next quarter. And again, then we will present this next support for Q2, 17th August. And That we're looking forward to. So thank you for listening. Sorry, the 24th August. So very welcome back. Thank you.