Q4 20/21

Aug 17, 2021

Hi. Thank you, and welcome. It's a very good day, and I'm so proud to present the first report from Revolution Race. And the results are very good, and I'm happy to present it to you. So let's start it. Jesper, Do you want to introduce? Good morning, everyone. I'll get back later on with some of the financials. Revolution Race is a Digital native in the active outdoor category started 8 years ago, and nowadays we are selling in 35 countries. And we believe that the auto industry was overpriced. So we wanted to solve that problem By skipping the middleman and go directly to consumer business model, we are able to give the customers great outdoor quality products at a reasonable price. And we are selling in many different region. And we are going to report Nordics, DACH and rest of the world. And DACH has grown Very good now. We are still the largest region is still Nordic countries. We are still growing here, and And we are growing even more in the DACH. That's very promising for us and our business model. And Germany is the biggest market here and we soon plan to add Switzerland. As a digital native brand, we have a great communication on social media with our customers and catch the needs and expectations of us as a brand. This has been successful and 275,000 unique product reviews. And the score is 4.6. That tell us that they are very happy with the customer experience. And now over to the results, SEK 897,000,000 and we went that means that we have an increase in sales yearly, 132 percent. And every single one of these that we are presenting to you today are improving, the EBIT margin, the average order value and also the growth. And we are growing in all of these markets. The business model, the benefits are large and many. And Result and report tell us that the direct to consumer business model, e commerce player, are growing even faster than regular e commerce. So we are in great position in the active outdoor, both with the communication with Customers on social media, but also the data driven business model help us to predict coming products that we Go for. This is good for the customers because we skip the middleman and can give the customers a product with high quality at half the price. 132 percent in growth from last year, that is great numbers. I'm pleased to present to you these numbers, and it's mostly because of operational skills for Revolution Race. We have grown nicely in several new markets with improved results and also We're growing quite good in the DACH and the Nordic countries. The adjusted EBIT margin is improving 27 point 6 and went from SEK 83,000,000 last year to SEK 252,200,000 this year. That is a great improvement, 203%. And as I said before, I'm so pleased to be here today. And we went public company on the main list 16 June. It was a great process and we are Very pleased to be here. Now over to the quarterly highlights. We grew even better in this quarter compared to last year, 152%. So we are not one of the category winners. We see ourselves that the multifunctional kind of products has increased and are here to stay because the modern person of today wants to use multifunctional clothing even in the city. So the seamless moveness between the city and the woods are even greater, and we expect that to stay after the COVID. The COVID effect, in our opinion, is roughly 16% and the rest is operational Improvement. We are going to focus on both assortment and develop it further. And did I miss something here? No. We can move on. We talk about this, and as you can see, the DACH is now growing the most. So that gave us 45% and the Nordic countries 41% and the rest of the world is roughly 14%, 15%. And with that said, I'm very happy to see that we still grow so good in the Nordic countries as well. It's a growth of 68% and The DACH is growing this quarter to 196%, but the yearly improvement are 176. So everything looks just as we wanted. So I'm happy for that. Average order value increased 4.4% to SEK SEK 740,000,000 compared to last year. We have a normal impact because when the Summers here, the products are less pricey. So then you can see some difference in the quarter when you're selling more high functional products. Its target are SEK 2,000,000,000 in 3 years and at least 25 percent EBIT margin. And as you can see, we have kept our promises at 27.3 this year and 132 percent growth. So the dividend policy 42 percent. I'm going to let Jesper talk a little bit more about that one. Yes. So the dividend policy has been stated to be between 40% Race. And we're at within that range, and we're confident that, that is a solid start to our distribution payment going forward. Okay. So I'll take over and do a slight deep dive into some of the Financials, the year was a super year for us with net sales of SEK897 million, which represents a growth of 132%, which we're incredibly proud of. Going into the Proud of. Going into the Q4, the sales number was 174,000,000 Representing 152 percent sales growth. We see high growth In all product categories, we've been very successful in our market And also the product offering has been broadened. We have been affected, as we've Stated previously as well that our inventory levels have been lower than desired, and that has affected our net sales Development by either no selling or delayed selling. So we're definitely hoping for a Profit and gross margin, the increase in gross profit for Q4 4% was 167%, which is an incredibly strong number. The margin has improved in Q4 to 73.4 Percent compared to 70.1% in gross margin Q4 last year. The increase is explained by favorable currency mix, but also that we've increased our share of sales in markets We have also been negatively affected by increased logistics costs for inbound. We see delays, and we see definitely Race. Serious cost inflation in sea transport. But despite those negative factors, we arrive at a very Solid gross margin. Cost development. When it comes Through staffing cost or personnel cost, we've seen an increase continuous increase over the quarters last year. And this is us Catching up with the incredible growth that we've seen, we have to increase our staff and there is This will obviously continue but at a somewhat lower pace than during the past 2 quarters. When it comes to Our other external costs, those have adjusted for the IPO costs, which is our only adjustment factor. They've been very flat Around the 38% to 39% level, and we're extremely happy with that Well, this is a good slide for any CFO to present. Full year SEK 252 SEK1 1,000,000, which is 3 times that of the previous year. And adjusted EBIT margin of 27 0.6% is a unique EBIT margin 2%. We've seen a gradual increase during the past year. So the last quarter, we arrived at 28.3 The adjustment, as I said, it only relates to our IPO related costs Amounting to SEK 21,800,000 for the financial year. Balance sheet, we remain a very asset light company, and we intend to continue that way. We see an increase in accounts payable and in equity, but otherwise, the balance sheet remains very asset light. Net working capital, well, that has been extremely beneficial for us over the past year, which is primarily related to The inventory levels, which, of course, have been lower than desired. We're now moving into we started already in Q4, but We're moving into a new year where our aim is to build inventory in order not to have a negative effect on sales. So we can expect inventory to increase over the coming quarters, and that will Set partly by inventory buildup, but we've generated SEK28 1,000,000 from operations. And we're ending the year and the quarter with a cash position of SEK296,000,000 of which SEK 72.3 SEK 1,000,000 is proposed for the dividend following AGM decision, Which means, going back to the dividend, we're in the unique position In our line of business to be able to pay a dividend and the proposal is for SEK 60.64 I'll hand over to Pranila for a bit more operational updates. Yes. Thank you, Jesper. Yes, we have done a lot, and we are planning to do even more. We have a successful launch in the U. S, but Revolution Race are always aiming for a soft launch to understand the new markets, both when it comes to which products, target groups and so on. So we are not expected that to affect this and maybe next quarter that much on total net sales, but it's looking very promising for the future, and we have a great start. We're starting on Amazon to calibrate our offer to the new market and also the new continent. Some months have some. You can say we have quite equal quarters, but some difference. And the Q1 are normally for us the weakest. But still, we have seen the start of the new quarter has a strong start, and we are We are planning to continue to roll out in 2 to 4 new countries. And as I said, we started in U. S. Recently. And also we are adding Switzerland in this quarter and more countries to come up later on. Last year we went in Ireland, Spain. So which one? I forget that. Belgium. Belgium. Yes, these three countries. And the start is good, and we are a profitable in all of these. And that is one of the biggest also contribution to the great Development that we are able to, quite early in the journey, be profitable on new markets. And we have very clear the plan how to calibrate the new markets so we can have the best offer on that specific market, both when it comes to content, relationship with the customers and also what kind of products we are planning to sell there. The logistic, we have a lot of customers in Europe. So we are planning to ramp up the Logistic Hub to better be able to shorten the lead times to the customers and also the environment impact with shorter way to our logistic Center. So the numbers, we are planning to have 100% of the assortment in both of these. So we are ramping up and build up our stock levels that we have a problem with last year to be able to grow the way we want. Yeah, there's a lot of things going on. And this wholequarter.com, we are in and we are planning to launch several new products category. For example, Shoes, backpack coming in the end of Q4. And we are launching new products in existing categories. So it looked very exciting for Revolution Race, both with the penetration of new markets, develop existing ones and also developing Issue with the supply is a little bit for whole the world with lack of container, but I think that We have built a very good start here with ramping up the stock levels, so we can be even better prepared this year than last year. This summons up the presentation from our side, and we're opening up for any questions that Race. Our first question is from Nicholas Ekman of Carnegie. Please go ahead. Your line is open. Thank you. Yes, I have a couple of questions, Jens, if I may. Firstly, is there any way you can elaborate a little bit more about current trading? Obviously, this has been a very strong Quarter for you, you're guiding for sustained strong growth, but comparisons are starting to get tougher as well. So I'm curious, When you talk about strong momentum in the start of Q1, are we still talking about 3 digit growth rates? That's my first question. Okay. Yes. The Q1 last year, we grew by 53%. And this year, the plan is to grow even more than that. So but it's not 3 digit numbers. You can see that in finance target that we have talked about before SEK 2,000,000,000 the coming 3 years. We are not boosted by COVID, but we have invested operational very strongly last year. So we see that Everything goes according to plan. Very good. Thank you. And I'm Curious, when you talked about the COVID impact, you said 15%. I assume you're referring to a 15% boost to your Can you tell us a little bit about how you came to that conclusion? Is that based on what you've seen from peers? Or where does that number Yeah, it's a lot of factors. But to mention 1, the PostNord evaluate the COVID impact in the different categories, and we are not one of the category winners. So the demand for Our kind of products are not changing in the way, for example, in the furniture industry. So We believe that the number is decent. It's always hard to predict how much impact, but as we can see, the effect for our category aren't that much comparing to other categories. Very good. Thank you. And I'm curious when we've been looking at a lot of other online retailers have indicated rising costs, Particularly here in Q2 because a lot of them faced very tough comparisons. And one thing that has increased, for instance, is marketing expense This which we've seen from several online retailers. Is this something you recognize at all? Is it something you we should be aware of going forward That costs are likely to increase in any form? Or do you feel very comfortable with your cost I think we have give the market very we are still confident in our finance target. And when it comes to Marketing. We have it in house and we know how to calibrate new markets. We have a clear strategy and the effect for both COVID and others haven't affected us. So we believe in the same numbers that we did before. And that also telling me, at least, that we are not one of the COVID winners. So this is a reflection of the financial goal of a minimum But I mean that maybe if you have a boost Because of COVID, maybe marketing is one of the KPIs that boost your business. But if it doesn't boost and you expect the same numbers that you did before that tell me that you are not one of the category winners in the COVID situation. Okay. Thank you. Thank you so much. And you mentioned here earlier that you're planning to launch shoes and bags here in Q4, I assume you mean calendar Q4, so your Q2. Can you tell us a little bit about A little bit more about this launch. I mean, how many SKUs are you talking about? How are we talking about a soft launch similar to what you talked about with the U. S. Market? Or How what should we expect? Should there be significant costs related to this? Or is it just a soft launch? Very good question. And now we always start with a little less quantity, and that is also because we want to improve the products on the new categories. So you cannot expect it to affect the gross profit that much and not even the net sales from this 1st batch, but we are very good in predicting these numbers that we are getting from the 1st batch, so we are able to better predict how much we should produce in the future. Very good. Thank you. Look forward to seeing those products. And best of luck and thanks for taking my questions. Thank you. Our next question is from Daniel Winn of Nordea. Please go ahead. Your line is open. Yes. Good morning, Panila and Jesper, and congratulations on a very strong quarter. My first question is around the gross Margin, so you mentioned a few drivers here. You talked about currencies FX. You talked about the mix effect From different regions. And then also we have this freight cost impacting your cost of goods sold. And what we've heard from other Companies is that, that has been increasing very fastly. So I just wonder on the gross margin overall, could you give some kind of indication of what you But for the for the first for your first financial year, so to speak, over the next two quarters, for example, how do you expect this to pan out overall? If you can tell me how currencies will develop and the World Sea shipment market will develop, I'll get back No. Obviously, it is a slightly complex situation, especially when it comes to the logistics We've seen a massive increase in cost for sea shipments during In Q4, in the gross margin that we present for Q4. And looking at our historical levels, we've Been in excess of the 70%. Now we're at 73% plus. On the company's control when it comes to Yes. I want to add some flavor here. The direct to business model gives you a lot of benefits when it comes to adjust for this kind of stuff. So the company is constantly working with improvement on the COGS. And with that said, the things that we cannot predict, that no one can predict, we're still trying to predict as good as so we are able to keep the margins up. And historically, this company has been very good at being prepared for the unprepared and Keep the numbers up. Great. Perfect. Thank you very much. Then another question is on the Of inventory position. So I understand that you have been actively working here to increase inventory position. And it looks, Yes, quite high now and quite a big growth versus last year. So it's a bit hard to decide here on how we should Look at that, is this exactly in line with what you planned for, your strategy? Or is there any risk with this Inventory position, and I'm here thinking both way. Could it still be that you will be out of products? Or is this already a quite high level and that you need to sell very strongly in the next quarter. So if you could have some comments on the inventory position, that would be great. Thank you. Yeah. Bear in mind that we have a running assortment with products that we are selling yearly, not seasonally. So when we level up the stock levels, that means that we don't take as much risk as many other fast fashion industry. So the risk of You want to add something? Yes. So it's definitely a balance. There is a risk of working capital tie up in an increased inventory. We see the risk in the products in the inventory is very low, but we have to balance that against the risk of Losing or delaying sales because we're out of stock. So we're calibrating that balance, and we're now moving into To a position of improving inventory levels from the perspective that we do not want to be out of stock for As large part of the SKUs as we have been over the past 6 or 9 months. Okay, perfect. Thank you. Then just another question. If I try a little bit here on the U. S, just Try to get a little bit more color. Maybe you can Can you hear me? Hello. Can you hear me? Can you hear me? Yes. I think we had some technical issues here. So if you already asked your question, Can you please repeat it because we didn't get any of it unfortunately? Yes. Hi, it's Daniel. Can you hear me now? Yes. Okay, perfect. Sorry, I lost you there for a while. Yes, I was asking about the U. S. And whether if you could give some more information on The launch there, perhaps just talk about what activities, how you've entered it with influencer, etcetera? And maybe also if you could compare it the launch in Germany and U. K, for example, how has it been developing? Is it just as promising? Or is there any difference? We started this new continent and U. S. Market with the launch on Amazon to find about what kind of products that we are aiming for on that specific market. And also, we have some local Lancers that we are collabing with. And we put that content on Amazon's platform so we can show the American local content produced by influencers? Okay. And the reception has been as you have expected? And maybe if you compare it to the launch in UK recently where you had a really strong Reception, would you say, is just as promising? Or is there any difference? Well, the big difference one must bear in mind is We were already very successful in Europe when we started going on Amazon in Europe. Now we're using Amazon in an entirely new Continent. So we're obviously starting at a slightly different position than we did when we started using Race in Europe. But with that said, the target that we are aiming for, everything goes as planned. Great, great. Okay, perfect. And just a last question here then and that's on the Adjusted EBIT margin. So I noticed that you talked about a uniquely high adjusted EBIT margin. And I know that your longer term guidance here is To be at least 25%, and you're now a bit above that level. So I just wonder, is it fair to assume that you will invest More in growth going forward, and we should expect that margin to come closer to your 25% level? Or is this a level you think you can Going forward, if you can give some color on that, that will be great. Thank you. I must first of all, I must calibrate my answer. I said Uniquely high, and that is in relation to the sector, not in relation to Revolution Race itself. But We have a financial goal that is to maintain an EBIT margin in excess of 25%. We will see fluctuations depending on when we have possibilities to grow even stronger or to calibrate Our growth versus profitability, but our financial goal remains the same. And we're now In a period over the past quarters where we've been definitely well ahead of our financial goal. But at the same time, we are investing in the growth. But Revolution Race have high EBIT margin since start, even the 1st year. But with that said, some COVID impact on the EBIT margin, But at the same time, 25% at least stands still and it looks very good for us in the future as well. Yes. Okay. Perfect. That's a great answer. All right. Thank you very much for taking my questions. Daniel? Thank you. Our next question is from Ewan Brown of ABG. Please go ahead. Your line is open. Thank you. Hi, Peniel and Jesper. A couple of questions From me as well, and I take them 1 by 1. Firstly, just containing on the current trading statement, and thank you for the color there as well. But I was just wondering if it's possible to sort of give any color on if you see any differences Between your regions or is it more of the same essentially? That's so hard to answer that question because we are growing in all of these regions, but we own our own business model. So for example, if some countries are having a hard lockdown, then we can shift our marketing to that specific market that we have a better chance in succeeding thing kind of situation we are in. And that is also the result of revolution racing somehow. But can I say The development on the different, you can see it in the report, and we grew strongly in all of them? But the situations that are out here, we are going to adjust according to that. Great. Thank And continuing on the gross margin as well, is it possible to specify or quantify the impact of these increased The inbound freight rates. It has a it does definitely It has an effect if sea prices have doubled, but we're not giving The details of every specific component going into the gross margin. So we're not going to break Down any further now. But obviously, in our cost of goods sold, The majority of the cost relates to the products. Then transport or logistics is one Smaller component, but if you double that smaller component, it definitely has an impact. But despite that, we arrive at 73% plus for the quarter. Thank you very much. And a last question from me as well, continuing on these new Race. Product launches in shoes and backpacks and connecting that to the average order value, which has been increasing for some time. Looking at your historical product launches, do you see that these lead to the consumer adding more products To the basket. So are we mainly talking about a mix effect driving the AOV? Combination. Over time, if you're adding products with higher average sold per piece, then you are going obviously increase average order value. But with that said, from the start with lower batch, it's not going to impact that much. But for future, yes, my best guess is that you are right. Wonderful. Those were all my questions. Thank you very much. There are no further questions at this time, so I'll hand back over to our speakers. Okay. So I think we're wrapping up this presentation. Thank you so much for your Interest in Revolution Race and listening in to us today. And we We remain available offline to help with any questions that you may have. Yes. And I want to end the call with out of the result of the quarter. And also thank you for listening to us. And this rookie has not give you rookie numbers? Thank you. That's correct. Thank you.