Good morning, and welcome to our Q4 and year-end presentation. My name is Amanda Åström, and I am Head of Investor Relations. Today, I have with me Anders Hedebark, our CEO, and Petter Sylvan, our CFO. Anders Hedebark will now start off by presenting some highlights.
Good morning, everyone, and welcome. We are very proud to present great Q4 and full-year figures for 2021. I would like to start out with saying that we are proud also to deliver according to what we said in the IPO process, eight months ago. Actually, we are doing better than we presented, and I would like to congratulate all of you as owners to a great company. At Profoto, we're really doing well in our small worldwide niche, selling professional product to professional photographers. We have noted a significant structural increase in demand of high-quality images, so pictures. This is mainly driven by great brands all around the world that needs to produce great images to drive traffic and increase conversion and selling on the internet.
We see for the quarter a 26% in net sales growth. This is basically based on America's opening up and really starting to have much higher activity than previously. It is somewhat slower in EMEA and in APAC. In Europe and in Asia, we do not see the same kind of growth figures. We believe that this is due to the reinforcement of restrictions in the end of the quarter. We have also noted a shortage of components continuing as we have communicated previously, but it has had a limited and also manageable impact on the quarter. We see a strong quarterly sales, and we are exceeding the pre-pandemic 2019 figures for Q4.
The margins are good, so we see that our sales is SEK 218 million in comparison with SEK 173 million with the figures for 2020. The EBIT margin is 36%, and this is corresponding to an EBIT level of SEK 79 million. We could clearly see on the graph to the right side of the presentation that we are continuing our bounce back from the low pandemic figures. We're also very much enjoying a very highly profitable recovery for the full year 2021, and we are seeing a net sales figure of SEK 732 million with a 32% EBIT margin and an adjusted EBIT of SEK 237 million.
As you can see also in the graph, we are not back to the full year pre-pandemic levels, but the profitability is very good. Let me give you a snapshot of Profoto, what we are, our history, and our future. We were founded in 1968 by Conny Dufgran and Eckhard Heine. Already from the start, we were focusing on the premium position in the niche market that we are active in. I will talk more about that. I came into the company almost 25 years ago in 1997, and during my time, we have increased the customer focus and launching more quality products for enabling growth. We have continued to have a very high level of entrepreneurial spirit and drive, so that focusing really on growth.
When Petter came into the company in 2009, also the profitability rose to extraordinary levels, and this is what we could present to you today with very good profitability. Profoto is the world leader in lighting products for professional photographers. We are active in the growing image and content creation market, where we enjoy the premium position in the segment photography lighting solutions. We are providing an innovative and easy-to-use flash and light system, for professional photographers, and we are really used by the world's best photographers. We know this since the best photographers, they are renting their equipment. We know all the rental companies all around the world, and more than 70% of rental flash in all parts of the world are Profoto flash. Really, the world's best photographers are using Profoto.
We sell obviously all over the world where great photography is made, and we are focusing on organic growth and high margins. This demands large investments in innovation. We also combine this with high operational efficiency, and one of the things that we do is we do not own our own productions, so we have outsourced production, and we outsource a lot of other things also. This means that we have a very asset-light balance sheet. Check out our return on capital, and we are one of the, we have, we enjoy one of the highest return on capital on the Swedish stock market.
This combined means that we really need to have high-end staff, and we are only hiring the very best people that we could find in the market. This, the staff of Profoto is really what is making the difference and driving growth and profitability. We are active in the larger image and content creation market, and this is all kind of content produced, including TV, film, video, et cetera. This market is showing a very strong growth, and Profoto holds the, and this is the black part here, holds the premium position in the segment lighting solution for professional photographers. This market is growing 3%-5% CAGR 2023-2025 according to market study that we conducted during the IPO process.
All this growth is based on the exponential growth of number of still images published, especially on the internet. We're focusing hard on innovation to drive sales. What is really making the difference is when we are launching new products into our niche, worldwide niche. During 2021, we launched two major products, B10X and B10X Plus, and the Pro-11. The Pro-11 is really the product that is used by all the rental companies and all the high-end fashion companies to produce this stunning imagery that is needed to drive their own brands. We invest around 10% of sales back in R&D and product development. We are obviously working very actively with patents.
We have quite a few of our staff, more than one-third of our staff are active in R&D, but we also are using a lot of consultants, a lot of outsourced partners, so this figure should actually be higher. Anyway, that's what we do. That's what we continues to do and to drive the growth within our niche around the world, worldwide niche. This is the black part of this image. Really selling and launching new products to professional still photographers all around the world. Organic growth is the key here. We also see the possibility to grow in different areas. I would like to start to the right with e-com workflow solutions. That's an area where we see growing a lot of in the moment.
We sell a lot of products into this area. The Pro-11 I have mentioned, but also D2 and D2i, and a lot of light-shaping tools are widely used among both the high-end brand, but also the more specialized e-com players in the industry, which you, I'm sure you know very well about. This is the first area where we see the possibility for organic growth as well as platform acquisitions in order to take the next step and make a wider offer to the market. Secondly, light for moving image. Video, vloggers, broadcasting, film, cinema. We have products already today that which we sell for applications like this. This is mainly the B10 and B10X, which are used by photographers that is also shooting video.
We see possibilities in this area to grow a lot. But this is a separate part of the market, and we need to do this in the right way, both in form of organic growth and platform acquisitions. Thirdly, we see a potential in professional smartphone photography. Today, Profoto is the only company in the world that are able to sync and use professional flash system with your smartphone. Remember, there are around 1.5 billion smartphone cameras sold annually into the market. The only way to use that, if you wanna use real light, you have to use Profoto. Basically, all our products are able to work with your smartphone camera.
We have an app called the Profoto Camera that you could download for Android or for iOS. Let me take you back to the investment case that we presented seven or eight months ago. What we said that was that we are a leading brand in a global market niche, and I think that we have talked about that already today. We are active in an attractive segment in the growing content creation markets. Our focus is really on core operation and innovation to expand the addressable market, but also sell more to existing customer and existing customer groups. We have several possible avenues of growth for which I just presented that in addition to the organic growth prospects that we have.
All of us at Profoto, we have a long history within Profoto. We are well educated, and we're very dedicated to drive and make a change in the market. We have historically had, and we're showing this today also, long-term organic growth and exceptional profitability records. This is what we plan to continue to do into the future by hiring very good staff in addition to launching great new products. I will leave the word to you, Petter, to talk more about the figures and details about the figures. Thank you very much, and please remember to ask us questions in the end of the presentation. Thank you.
Thank you, Anders. Profoto has had a long history of organic profitable growth. The last 20 years, we have delivered 17% growth year- on- year. EBIT started out in the beginning of the period up to in the range of 10%-15%. In the last years pre-pandemic, we have increased that to in the range of 25%-30%. Now, as many of you know, we had a clear dip in 2020 since the restrictions from the pandemic in the world heavily limited our business, but now we are rapidly recovering. Looking at this recovery, I would say that in Q4, we are for the first time trading back on the levels pre-pandemic. We're actually slightly increasing it in total, and that this is most notable in America.
In America, we lost about 50% of the sales in 2020, so the rebound has also been most strong now when the recovery come. APAC has grown since 2019, and that is mainly an effect of that we have increased our local presence there. In 2019, we started an owned subsidiary in the Chinese market. With strong sales and high efficiency, we are delivering 36% in the quarter, which is clearly exceeding our target in the range of 25%-30%. This is great. We don't believe that it's long-term sustainable, given that we are investing heavily in more marketing mainly in order to create more growth.
In short, we are far exceeding our financial targets, and we have also recommended the dividends of SEK 3.5 per share, which corresponds to 89% of the profits generated in 2021. As a consequence of that, we have delivered strong sales in the quarters. We have revised the financial targets, and we have simply removed the clarification that we have had that we aim to reach SEK 800 million in 2023, since we now simply believe that it will happen earlier. That was all I had to say, and now we leave for questions.
We have a first question. It's from Karri Rinta, Handelsbanken. The line is now open for you.
Yes, thank you. Thanks for taking my questions, and congratulations on a strong quarter. Firstly, maybe about the pipeline for 2022. I mean, we know what products you launched in last year, and then I guess you don't wanna, of course, you don't want to disclose which products you plan to launch in 2022. But would you characterize the coming year as typical in terms of the number and importance of product launches? And then maybe a follow-up question is that since we now have this positive boost from reopening, is it so that it's maybe better to save those product launches for 2023 to drive growth that year?
No
In which year are these product launches more important?
No. It is always important to bring new technology to the market and to actually provide our high-end photographers with new products and new possibilities to shape light and create great images. As soon as we are ready to launch, we are launching, and we are working, as you know, constantly with product development. We have a pretty stable product pipeline, and we hope to launch products this year as well as in the same way as we did last year. But we are focusing high on expanding also our R&D department so that we could come out with new innovations to this niche market or worldwide niche market.
We will not save any products for next year.
All right. Thank you. About this industrial e-com workflow solutions that you mentioned as one of the growth opportunities. I mean, what is the main impediment to doing a deal today in this space? A platform acquisition in this space today, is it that you feel that you need more time to learn about this ecosystem? Or is the ecosystem itself too immature that there aren't any platforms to speak of today?
It's like this.
E-com photography is basically studio photography, and we are providing equipment for studios since 1968. We know this market very well. The case is that the high-end brands do need e-com. Profoto already have a very high market share in that area, but there are also many more needing to take great images and do this in a good operational way. We are already very present and we know this market quite well. The market is developing concerning software in addition to light and other studio products. We are looking on different options in this market segment, but as we have communicated earlier, we are very picky when we do this.
We are looking for both the culture of the companies, obviously, but mainly also what kind of products they offer that are sustainable long term, that they also have a good product pipeline so that we could add it on to Profoto in order to make one plus one more than two. Our brand is also very good in this market, so people love to talk to us since we are the market leader in the studio segment. Something might happen, something might not happen. We will see. We're working actively. We have a long list. We have a short list, and we have a pipeline of some sort.
As you know, our focus is mainly on organic growth and because we see this high profitability in launching new products to the market that we have developed ourselves. This is our main focus. We have people, we have organization for making it possible also to do acquisitions. Maybe you want to add something there, Petter?
Finally.
Oh, okay. Please, Karri.
No, sir. Yes. Yeah. Finally about the dividend, the payout ratio of 89% is-
Yeah
On the one hand, it's in line with your financial target, but it is rather high. So I just wanted to sort of
Yeah
... confirm that it's more of a reflection of the fact that you don't have any net debt or you have a very strong balance sheet. We shouldn't interpret it as such that you're handing out excess cash because-
No
You have no better use for cash.
No. The fact is that we are rather profitable, very high cash conversion since we have a very asset light. This is obviously based on the high return on capital, one of the highest on the Swedish stock market. That is why we have a good cash forecast, obviously, since this is what we do and we foresee that we will operate on a good profitability according to our financial targets. This means that we have a good cash flow. We've had good cash flow last year, and we continue to operate on more or less the same level.
No, we are investing in new products, in marketing, et cetera. We foresee that we will be able to do that and more and more, even if we deliver high dividends as well.
All right. Just to clarify, I mean, your dividend policy doesn't say anything about how do you expect your dividend to develop going forward, but of course you know that all companies or we like dividends to grow. So that's.
Yes
is probably an implicit assumption there as well.
Yeah. Our target is more than 50% of the profit.
Yeah. That the absolute dividend is also growing year after year.
Yeah. We also would like dividends to grow in absolute number. Yes.
Perfect. Thank you. Those were my questions.
Thank you.
The next question is by Rickard Lundevall, Carnegie. The line is now open for you.
Thank you and good morning. A few follow-ups from my side. Just continuing on the e-commerce, could you maybe share some details on the share of revenue today and if this segment or initiative is tilting the profitability in any sense for you guys? Sort of my first out of three or four questions.
Yeah. We cannot share any figures on exactly that, but the main products in this area are the studio products. These our studio products are mainly for the D2 and for a D2i, which is a specialized product for this kind of photography, as well as the Pro-11. In addition to this, also B10X and B10X Plus is used for some of the photographers in e-commerce. That is what I can say about that. What we can say is that this kind of product are well demanded in the market. We see a good growth here, but we do not share any special product sales figures.
Okay. Given these are some more of the product names you mentioned here have higher average selling prices, is it fair also to assume that once you have good sales on these, then the contribution to profit is, you know, from a margin perspective also above group average? Or would you say that it's more or less in line or below that? For most of our products we have fairly similar gross margin. So the variation is relatively low. But having said that, the studio and the e-commerce products are one of the more profitable areas for us. These are customers with very high requirements and they have extensive budgets to resolve their problems clearly.
Yeah. We could also see the structural change. One could have believed that we would have sold much in the beginning of the pandemic, but we did not. What has happened is that all e-commerce companies, basically all brands need to produce and sell their images and produce and sell their products on the internet. They are working step-by-step to improve their operations. We are very happy to be able to sell the Pro-11 into this market, which Pro-11 is really state-of-the-art and really the best you can get in the professional photographic market. The people that are using that are all the big brands, but also the big rental studios all around the world.
Okay. Clear. Thinking of product mix and thinking about new launches, you mentioned you have B10X in 2021. And maybe if you could just elaborate a bit on when you look at your sales mix now on the new launches versus call it more older legacy products. Is there you know sort of normal steady state going on, or how has the ramp up of the new products been so far? Just so we can get an understanding of sort of the ramp up and the decaying of the mix.
You mean into 2022, what kind of if the product mix will change due to product launches?
Yeah.
Is that your question, Rickard? Yeah.
Yeah.
So-
Yeah.
As you remember, my black bulb here, with that this is really our focus, organic growth. This is within the same customer group, which is all the photographers that are willing to invest time and money into light-shaping. That's where we are. We see that we have several gaps in that market, and no one would see that but ourselves. Very small gaps that we need to fill into this market, both in terms of functionality and price points. We are really delivering, and we are looking to update and add into holes in this market. Generally, we are focusing on the customer group, professional photographers, e-commerce companies, all around that, needing professional images.
We will continue to do that. We will try to do this in as high pace as possible in order to fulfill the demand that is within this customer group to constantly change their way of how they actually produce their images and different kind of light setting might be able to actually increase both traffic and conversion and minimize returns for these kind of companies. We will continue what we've done last year and continue to do the same thing more and better, basically.
All right. Finally, question from my side, you mentioned Anders in your CEO letter that obviously the margin performance is very pleasing to see, you know, well above the target of 25%-30%.
Yeah.
also that you don't expect to stay at these, call it elevated levels in the longer term.
No.
Just to get an understanding on your maybe increased efforts on the marketing and product development. These incremental spend or investments, is it more of doing the same or do you see sort of new pockets in any sense, anything from geographies, or how to market or if your incremental dollar will be spent on lighting, relatively more than maybe the flash? Just to get a sense on that commentary from the CEO letter.
There are two areas that we really focus on. It is product development, and it's in sales and marketing all around the world. That's number one. We will continue to invest, hire more staff into R&D and start new products and projects for new product launches. This is what we're focusing on. If you look on our LinkedIn page now, you see that we are actually recruiting heavily. We have around 10 people that we're looking for. Since we are less than 100, we have a significant increase in staff, and especially in the area of R&D, but also in sales, where we're looking for more staff in sales.
We will do more, even more to support our partners all around the world or all our photo dealers, and we will also do more in direct communication with end customers over our own platform. You might have noticed that we have seen a good success with what we call Share the Light, which is in the beta versions, where users communicate with other users. We are applying the user-generated content strategy. Photographers are showing other photographers how they actually create great images. This has been so far very successful.
We're looking to continue that, to actually make us an attractive party-to-day partner with all professional photographers in their change of how they actually set the light and create great images. We'll continue to do that, but also here we are very careful. We do never overspend. The reason is that in our customer group, basically, and if you should go out and ask professional photographers, basically all professional photographers, they already know of Profoto. So brand building is, on its own, not very important for us.
However, to show real quality and real value, in terms of especially training and education, how to create great imagery, that is the route that we will continue to go in our marketing efforts. We'll continue to increase our investments pickily on a picky level and really ensure that everything we do is profitable, which is one part of our core values at Profoto. That's why we only hire the best staff, so to ensure that we really do the good things. We include, as I've tried to communicate here, our great customers in our communication strategy.
Okay. Fair enough. That's all from my side. I'll get back in line.
Thank you.
Thanks.
The next question is by Karri Rinta, Handelsbanken. The line is now open for you.
Yes, thanks for taking the follow-up. I wanted to continue discussing the sort of the post-pandemic versus pre-pandemic world for your customers, and we have discussed e-commerce customers because this market has, of course.
Yes
... experienced a nice structural uplift. If you look at the other core customers of yours, maybe specifically about freelancing photographers.
Yes
Everything related to events, so what's your
Yes
best guess of structural changes that for your sort of post-pandemic versus pre-pandemic, and how does that impact your sales of your different products?
Yes. Very good question. Thank you, Karri. It's about opening up for events, opening up for weddings, opening up for what we call on-location photographers, which is most normally included when you meet. The Nordic market where we are active here, we see that the market is opening, but it has not opened in the rest of the world. Somewhat in the U.S. In Asia, not so much. I just spoke to Taiwan this morning, for instance, and they are seeing one or two cases, some cases of people are becoming very careful. This means that they will not meet yet. We still have a lot of possibility when the markets in Europe, in Asia are opening up more.
We see that products, our specialized on-location products, which are based on battery technology and automatic exposure, that we the way that we control the light. This is especially the A10 and B10X, which we think that we will increase sales of into the near future when we see the pandemic fading out.
Okay, you're not, I don't know, worried is a wrong word, and maybe I'm fishing, but when these freelancing photographers start to get more gigs, that they would buy more of the, maybe the simpler products in your portfolio, in the on-camera flashes, or have those products become such a small part of your total that, even if the sales there would increase, they wouldn't have any noticeable impact on your sales mix and margins?
No, because we have pretty stable, as Petter just said, we have pretty stable margins all around, all over the product portfolio, and we think that we will not really notice a change in profit margins because of this. We are very happy that the markets are opening up. We are very happy that it gives possibilities for the freelance photographers to get more work. We are here to support, and we have launched great products, and hopefully, we will launch much more great products into this market to enable them to do even better photography. This will not have, as we see it, a negative effect on the margin. We will still have very good profit margins according to our financial targets.
All right. Very well. Thank you.
Thank you.
There are no further questions for the moment, and so I hand back to you.
Great. Thank you. We would just like to give you a gentle reminder about our next report for the first quarter, which will be published on the 5th of May. Thank you for joining us today.