Good morning. My name is Max Strandwitz. I am the CEO of Mips. With me today is Karin Rosenthal, Chief Financial Officer of Mips. I will take you through the highlights of a very strong quarter. We did see very strong development in the quarter with 82% organic growth. This is particularly strong given a 108% prior-year comparator. We were up against a very strong comparator, but still managed to deliver a very solid result. Year-to-date, organic growth is now at 95%, so the good momentum really continues. Growth is mainly attributed to a very strong demand that we see on the bicycle market. The bicycle market remains very strong.
We did continue to improve both our EBIT and operating cash flow, and they more than doubled during the quarter. Our supply chain challenges have been well managed, and the team has performed strongly, which you also see in the numbers. We do see high customer activities, more customers launching with Mips, and we made strong progress against our long-term ambitions. To the right, you see the Mips team member, Brandon Semenuk, celebrating his fourth Red Bull Rampage win as the first cyclist ever. If you haven't seen his final run, you have really missed something because it's epic. Do take the opportunity to see his final Red Bull Rampage race because that was really a fantastic achievement.
We continue to see strong demand in the bicycle market. Extreme demand worldwide and in most types of helmets. There are still challenges for factories producing bicycle helmets to meet demand. Therefore, our current assumption is that the low inventory levels on the market will remain, and that we will see a good bicycle market also during next year. If you then turn to next page. In snow, we see a stronger demand than we expected. We continue to see growth in snow helmets, both in the quarter, and we will also see solid growth when we close the year. We are outperforming the market in general and of course, gaining a lot of shares as the winter sport market is doing quite poorly, still suffering from the rapid lockdowns that we saw in prior year.
North America and Nordics are the key drivers of the strong performance, but we also see the European brands expanding their assortment with Mips technology in their portfolio. If you then turn to next page. The motor category, we continue to see very strong momentum in the motor category. It's actually the fastest-growing category. Very strong quarter with growth of 117% , and year-to-date number is now at 93%. Motocross remains the key driver, but we also see very good traction in street motorcycles. We are launching a significant number of activities to deliver on our ambition to increase awareness in motor. To the right, you see our newly signed ambassador, Carey Hart, who is a to support brand awareness in the category, to really make sure that we drive awareness in the category.
We do expect also to see good consumer demand coming quarters in motor. If we then look at the safety category, we are really starting to deliver on the ambition. Several new partnerships have been launched during the quarter. We have now announced also in connection with the biggest trade fair in construction, A+A. Nine helmet brands in total, which have launched their partnerships with Mips. The key focus in the coming months is to support the sell-through with those customers and to increase awareness of Mips in the safety market. No change to previous communication. 2021 is about establishing a customer base. We have established the customer base. In 2022, the focus will be on volume growth. If we then turn to next page. As everyone else, we are facing challenges in supply chain.
Supply chain challenges continued during the quarter., but so far, we have managed the situation very well. We see issues in logistics, shortage of raw materials, inflationary environment, and power restrictions in China, as for many other companies. We do expect the challenging situation in supply chain to remain unpredictable also coming quarters. If we then turn to next page, I'm now at page number 8, and we look at the development in the different categories. In sports, we saw strong performance, 78% growth in the quarter, 81% year to date. Of course, driven by a very strong performance in bike. The fastest-selling helmet type in the sports category is also equestrian, where we are growing close to 300% year to date. We're really happy that we are gaining market shares also in equestrian helmets.
Moto, like I said, the fastest growing category for us, growth at 117% in the quarter with good performance both in motocross and street. If we look at the year to date number, we are at 93%. If we look at safety, still early days, but a lot of new promising partnership launched in the quarter. I will then hand over to our CFO, Karin.
Thank you, Max. Good morning. I'm Karin Rosenthal, CFO of Mips, and I will present the financial results. Development in the third quarter. Net sales increased by 81% and organic growth was 82%. Gross profit was up 83% and a gross margin of 73.3%, up 110 basis points due to volume and sales mix. On OpEx, we continue to invest behind our strategic priority. A strong EBIT was up 101% to SEK 110 million. An exceptional EBIT margin of 59.6% in the quarter. We saw strong increase in operating cash flow to SEK 71 million. Key financial metrics include organic growth of 82%, an EBIT margin of 60%, and operating cash flow of SEK 71 million. If we then turn to next page, development in the first 9 months.
Net sales increased by 82% and Organic growth was 95%. FX had a negative impact due to a stronger SEK versus the US dollar. due to a strong SEK versus US dollar in the year. Gross profit was up 85% and a gross margin of 73.3%, up 90 bps due to volume and sales mix. In OpEx, we continue to invest behind our strategic priority, marketing and R&D. A strong EBIT was up 144% to SEK 221 million compared to last year. EBIT margin of 54.1% and a really strong increase in operating cash flow to SEK 196 million. Financial KPIs, organic growth 95%, EBIT margin 54%, and operating cash flow of SEK 196 million. If we turn to next page, we are now on page 11, balance sheet and cash flow.
We have a strong cash position with cash and cash equivalents of SEK 371 million, and the company has no outstanding debt. Our equity ratio is 78% after dividend payout in Q2. Over to you, Max.
Yes. Thank you, Karin. If we then summarize the very strong quarter, we did see very strong sales, again driven by high demand in bicycle market. We are gaining a lot of shares. The market is growing really fast. Of course, this combination typically results in strong growth. We also saw good development in moto and safety, strong improvement in both EBIT and operating cash flow. The good consumer demand is expected to continue, assuming no change to current situation. We do expect challenges in supply chain to remain for the coming quarters, and we did great progress on our journey towards our long-term ambition. We will now open the call for questions.
Yes. Thank you very much. I start off with one related to the challenging supply chain you see. You still report extremely strong growth figures in this quarter. Did the supply chain in practice actually affect you at all, so the growth would have been even higher without that? Or did you basically do as good as you could?
Thank you, Daniel Thorsson. A very good question. From our side, the miss side, We have not missed any orders. We haven't missed any orders year to date, so we have navigated really well. The issue on the supply chain is mainly related to the factory. If the helmet is not being produced, then of course we will not get the order and there is no order to miss. At the moment, the helmet factories cannot produce enough to meet the demand for the helmet market, so to say.
I see. That was what I meant. If I rephrase, I mean, if they could meet the demand that they actually have, how would that affect the growth rate in this quarter? I guess that you were limited due to the manufacturing sites actually couldn't source and supply-
You would have seen,
Right.
you would have seen.
stronger sales growth, and that's also why we indicated that the stock levels would still remain low in retail because they cannot really manage to build stock at the moment.
Okay. Clear. Something on the size or the expected volumes for the 9 brands you have signed and launched product in the market for safety category . Are any of those the top 5 or top 10 brand in the world volume-wise? If not, what is the main factor not having signed any of the larger ones so far?
Thank you, Daniel. No, they are not one of the top five. Some of them are mid-size players, I would say. I think this also goes back to the history of Mips. Normally, when you launch into a category, the fastest-moving brand is always the smaller one. They are very keen to be the first one with new technology in the market. The bigger brands normally take a little bit longer. When they come on board, they launch wider and so on, and it's exactly the same thing as we see also in this category.
Okay. That makes sense. The final question on the balance sheet and the cash flow, I mean, related to the capitalization of the company, you have an extremely high equity ratio. You are profitable. What could you do with that position? Are there any M&A you actually look at in the market today or anything else you can do without just distributing the excess cash and profits to the shareholders?
I mean, distributing the cash to the shareholders is, of course, the last resort. We think it's fantastic to always reinvest into our business, and we are doing that. We are not holding back on any investment, even though we are delivering a fantastic cash flow. We are scanning the market for complementary technologies or things that will complement our consumer offering. Nothing concrete at the moment, but of course, if there would come something that will fit our portfolio or our ingredient brand structure, of course, we will act on that, but nothing concrete at the moment.
Okay. Thank you very much.
Thank you, Daniel.
Yes, good morning. My first question goes back to the safety category, and it's a bit difficult to model assumptions for this category since it's so immature but also your largest one. I would appreciate if you could give us any help here. To my question, do you expect the ramp-up to be faster than the initial ramp-up that you had in the other two categories, for example?
Of course, we don't give any forward-looking statement, but when it comes to the momentum and the buildup of volumes, given the size of Mips that we are today, given the market situation and momentum we have, of course, we can accelerate the ramp-up a lot faster than we did in the other categories.
Got it. All right. My final question, I do wanna touch upon competition and what you're seeing in the market. Obviously, you've experienced significant growth throughout the pandemic. Do you feel like you've gone further ahead in the race, so to say?
Sorry, you broke up there for a little bit, but if I repeat the question, I think that first of all, you asked if there is anything on the competition side. No, nothing during the quarter that will change the picture. Then, the last part I didn't really hear, was that if we were growing ahead of our own expectation? Is that what you asked?
No, more about since you've had such significant growth throughout the pandemic, do you feel like you've gained further market share or gone further in your race than you had expected this quickly?
If you look at our long-term target, when we summarized 2020, we needed to grow with an average of 23% per year. Of course, year to date, we are at 95%, so that's ahead of that assumption. We are gaining market share rapidly in all the different categories we are in, so we are very happy with the performance.
Great. Thank you.
Good morning, everybody. Thank you, operator. Hello, Max and Karin. Thank you for taking my questions. Just first off, if you could help us to some extent at least piece out the drivers behind the very strong organic growth. I'm thinking about market growth versus you guys being in more helmets, being with more customers, so market growth versus increased customer intake and then penetration in the sports category. If you could give some more flavor on that, it would be helpful.
As we have indicated before, the general assumption of the sports helmet market and especially related to bike is that the market has grown somewhere around 20%. , of course, our growth you have already seen because if you look at the sports category, by far a majority of our sales is in bicycles, and we are growing significantly faster than that. The main part of the growth is still penetrating our brand, is still gaining a lot of market share. If then the market is also growing, of course, that also helps out.
All right. Thinking just sequentially about the sports sales, because between Q2 and Q3, obviously there is major step up in sales in that category. At the same time, I mean, retail inventories were low even as we entered 2021. What has really changed in the industry that has enabled the helmet brands to really ramp up volumes over the past few months?
There is a lot of things that is happening and there is not one single answer to the question because there is a lot of different drivers of what actually drives demand. First of all, I think the whole outdoor trend, everyone wants to go out bicycling, that's happening all over the world, and of course, we see a strong effect of that. Of course, we also see a very strong e-bike trend. A lot of, if you look at all the companies producing e-bikes, even though they can't produce what they sell, they have fantastic numbers. And normally, when you're traveling with an e-bike, you travel with a little bit more velocity. That normally requires a different helmet. And of course, we see a lot of demand also from that.
The e-bike trend, everyone assumes that the e-bike at one point will actually exceed the sales of normal bicycle. There is a report that was published some months ago where they expect that e-bikes will be more in number of unit sales than traditional bikes somewhere between 2025 and 2030. That of course is a very strong trend that we are seeing. Then the third one is the whole commuting trend. That's mainly isolated to Europe because of course U.S. is not a commuter market as such, where we see anyone just peeping out the window. You see a lot of bike commuters in every bigger city in Europe, and of course we see a good trend from that also.
Sure. I appreciate the demand drivers. I think those are fairly clear. I'm mainly thinking about factories capacity to increase sales because at least to me, it looks like market production needs to have been up quite significantly between Q2 and Q3. Is that sort of driven by additional factories, additional capacities coming online as we discussed previously? Or is there anything else that is driving that sequential improvement?
No, there is a capacity expansion mainly in China. Three major factories have been opened, and I think all the bigger factories have also tried to expand their capacity to meet the demand.
All right. Is there any further capacities coming on board? Is it possible to sort of slice the impact of three additional factories coming on board? Is that sort of a 5% increase in market capacity? Is this 20%? Any ballpark figure would be helpful.
I would say that the capacity expansion that we see in the industry in general is somewhere between 10%-20%.
Okay. Thank you very much for answering my questions.
Thank you, Fredrik.
Hey, good morning. Just a quick question on safety. Can you tell a little bit more about the seasonality for the construction safety helmet? Obviously, H2's heavily focused on bicycle helmets, and you have the snow helmets being predominantly in H1. If you can just give us any more insights into the very early days of the safety industry here, but what the typical seasonal production pattern looks like.
If you look at the safety category, I think the great thing is that we have actually not seen any real seasonality like we see in the other types of industry. It seems to be production all year round. Here there is also normally that a lot of the brands, they have their own production, and of course, they want to utilize the factory resource all year round. Not at all the same seasonality pattern that we see in the other industry.
In terms of factory production in China, has there been any shutdowns that you're aware of in any other factories due to the resurgence of COVID over there throughout the quarter?
Not so much related to COVID. There has been some impact in COVID in some of the ports, but nothing at the moment. What we have seen is, of course, there is some energy restrictions, so there is a couple of factories that have been forced to close for one or two days, and so on. I think that's the only thing that's happening at the moment, which could affect us at the moment.
Okay. Thank you. Just lastly, given sort of the capacity at the various plants, has there been or should we expect that there's a pent-up demand in Q4 or sales production volumes pushed up from Q4 into Q3 from the helmet producer's point of view?
I would more say that given that we are now going into the biggest quarter in the industry, Q4 is already full. If you look at Q1, it's also starting to get full. If you want to produce a helmet today, you need to wait a bit of time. I think factories are running on full capacity, and they're trying to get out as many helmets as possible. If there is excess demand like we're seeing at the moment, it's more pushed forward rather than that they can manage their capacity.
Okay. Have the sort of new capacity that's been put online, is that starting to come through or is this still sort of in green, greenfield mode?
No, it is coming through. A lot of the ramp up was started in the beginning of the year. Factories were commissioning, and they are up and running.
Okay. That's great. That's all my questions. Congratulations on a fantastic quarter.
Thank you, Carl-Oscar Bredengen.
If there are no further questions, thank you for joining us., thank you. We are really happy with the quarter and also the year-to-date performance, and we'll speak to you again next quarter.