Logo
Log in Sign up


← Back to Stock Analysis

Earnings Transcript for MIPS.ST - Q4 Fiscal Year 2023

Operator: Good day, and thank you for standing by. Welcome to the MIPS Year-End Report 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Max Strandwitz, CEO. Please go ahead.
Max Strandwitz: Thank you, operator, and good morning, everyone. My name is Max Strandwitz, and I am the CEO of MIPS. And with us today, we also have our CFO, Karin Rosenthal, and we will take you through the year-end presentation of Q4 2023. And if we start with the highlights of the fourth quarter, it was a soft quarter with a decline of 15% in net sales. If we adjust for currency effect, we saw a decrease in organic growth of 13%. We did, however, see quite a trend change versus previous quarter with growth actually in the bike subcategory. However, that was mitigated or offset by restrained ordering in snow, and we also see that the challenging situation in Moto that we have seen in the last quarter remains. We continue to see positive momentum in orders received and we see also a very high customer activity. And for you that are into the detail, you also saw that project revenue increased with 30% in the quarter, and that means that we're still having a very high customer activity and implementing more helmets with MIPS on the market, and we don't or haven't changed our assumption of a recovery in 2024. There is still a short-term uncertainty, especially in the retail environment, when it comes to the e -tail. We are seeing a lot of impact from the Internet stores and also backfire in the industry. Of course, MIPS doesn't sell to them directly, but of course, things are happening in the industry and that creates some turmoil. So far, very little impact from the Red Sea crisis. We will, of course, follow that closely, how that will develop going forward. As we see that this is a temporary challenge that we face at the moment, the Board is proposing an increase in dividend to SEK 6 per share, which is an increase versus SEK 5.50 the year before, and it corresponds to 249% of net earnings. And we remain confident in delivery of our long-term strategy and also our long-term financial targets. If we look at Sport, we did actually see growth in bike in the quarter. Little bit of a hesitant behavior in snow. It was a challenging quarter in Sport with a net decrease of 10%, but that's fully explained by soft snow category, bike back to growth again in the quarter. The bike sub-category is progressing well. We continue to see a positive order momentum and our previous assumption of recovery in bike remains. I think it's also important to understand that when we look at the bike category, it's not that we see that the bike market will all of a sudden start to grow. What we are reflecting in our assumption is that in 2024, we now see that the inventory levels have normalized. We see that our customers is starting to buy from us again instead of eating of their inventory. And of course, that will have a direct effect in our P&L and of course, will cause our net sales to increase, and that's really, really important to know. We do see more careful ordering in snow. Despite that, we saw a very strong start of the season, especially on the European market. And of course, inventory levels in snow and winter sport at the moment is very low. I think anyone that wants to find their favorite helmet at the moment will probably struggle because, of course, there is a lot of out of stock. What we see that the industry is a bit careful on is, of course, to do the repeat ordering for the season. No one want to take the risk of carrying any stock over to next season. And we are still very positive on the long-term outlook in the Sport category. In Moto, we see the soft performance continuing. We saw a soft development in the quarter with a decrease of sales of 66%, which is, of course, disappointing. We see, again, a more cautious retail environment, especially in the important U.S. market. We do expect that the softer performance will remain near-term. We have launched several initiatives to improve sell-through and awareness of MIPS in the category, and we still see that it will take one or two quarters before it has a full effect, but it really starts to work. and no change in the long-term outlook. Strong interest for MIPS in the category, and that, of course, is supported by both new partnerships and that we are launching more models on the market in coming quarters. In Safety, we continue to see strong development in line with our ambitious plan. We see good momentum and we are following the plan that we set up, both in terms of the number of models, but also the number of brands that we launched. We continue to see great interest from both the U.S. and the European market, and especially the U.S. market has worked really well for us. We also see some government activities where they are really probing from -- for having better helmets on the market and also really pushing the conversion into type 2 helmet, which is normally better helmets on the market, which are of course, beneficial for the launch of the MIPS technology into that segment. We did launch six new models at the large U.S. trade show World of Concrete, which means that we have now in total 21 helmet or models on the market equipped with the MIPS technology. And of course, we have a very strong platform now established in the Safety category to make sure that we also deliver on our long-term plan. With that, I will hand over to Karin, that will talk a bit on sustainability and the financials.
Karin Rosenthal: Good morning. I'm Karin Rosenthal, CFO of MIPS. And if we look at our performance in the sustainability area, we saw a great delivery in 2023, where we met our key sustainability targets. We delivered an emission reduction of more than 20% per product sold during the year and we are ahead of our science-based target ambition. We performed third-party audits according to our target to strengthen the alignment with UN Global Compact. Our conversion program to use recycled polycarbonate was fully implemented in our most sold products. If we then look at the development of net sales in our three categories. In Sports, we saw a decline of minus 10% due to softer performance in the snow sub-category, and we saw growth in the bike sub-category. Year-to-date, the decline was 37% in the category. In Moto, we saw a soft performance of minus 66% for the quarter and minus 53% for the full year. In Safety, we delivered a small growth in the fourth quarter and 181% growth for the full year. If we then look at our financial performance in the fourth quarter, we saw a soft development with a decrease in net sales of 15%, and adjusting for FX due to a weaker dollar versus SEK, net sales decreased 13% organically. Gross profit decreased with 17% and the gross margin of 70.2% versus 72.3% last year. And the decrease is due to an increased share of implementation revenue. In OpEx, we continued to invest in our strategic priorities. EBIT was down 27% to SEK 17 million with an EBIT margin of 18.8%, and operating cash flow of SEK 31 million in the quarter. So, if we look at the financial KPIs, minus 13% organic growth an EBIT margin of 19% and SEK 31 million in operating cash flow. If we then look at the development for the full year. Net sales decreased with 37% and adjusting for FX, sales decreased with 39% organically. In OpEx, we continued to invest in our strategic priorities, marketing and R&D. EBIT was down 69% to SEK 70 million and an EBIT margin of 19.7%. We saw operating cash flow of SEK 11 million versus SEK 236 million last year due to decreased earnings in 2023 and paid tax in the beginning of 2023 due to high earnings in 2021. If we look at our financial KPIs, minus 39% organic growth, 20% EBIT margin and SEK 11 million in operating cash flow. If we then look at our balance sheet and cash flow, we have a strong cash position with cash and cash equivalents of SEK 408 million. And just to remind you that MITs don't hold any loans. So, operating cash flow in the quarter was SEK 31 million and the Board proposes a dividend of SEK 6 per share versus SEK 5.5 per share last year, corresponding to 249% of net earnings and an equity ratio of 89%. Over to you, Max.
Max Strandwitz: So, thank you, Karin. So, if we then summarize the quarter, we did see a soft quarter, but we also saw a change in trends, of course. And it's really great to see the important subcategory bike back in growth again. Of course, it's the majority of our sales. And historically, that has been reflected in 70% of our sales. So, really good to see that bike has started to grow again. We do expect a recovery throughout 2024, and our assumption is that our sales will now start to go back to what is actually reflected on the market, so the sell out to consumers. Of course, we have been heavy influenced by the stock situation. It's not that the market has been flooded with MIPS helmet, the issue is that a lot of our customers and also retailer, they have been sitting on a lot of stock, not with MIPS helmet, but in products in general. And of course, if they are sitting on a lot of stock, they don't have any liquidity. And then, of course, they can't buy new helmet and especially new equipped MIPS helmet. That has now started to change. And of course, we are really happy to see that our performance will be much more in line what is happening on the market, but also we want to demonstrate all the different new helmet models that has been developed in the last two years that really didn't have a chance on the market yet. So, really great to launch a lot of the new MIPS technologies that we have been developing. And then, of course, as we have said before, we believe that this is a temporary challenge that we have seen. We have not seen that the interest in any of our categories has been challenged long-term. It's more a situation on the macroeconomic situation around the world, and of course, a lot of the turmoil that is happening. We see great interest in all our three categories, and that's also why the Board is proposing, again, an increase of the dividend. We are actually having a payout ratio of 249% of net earnings. So, great to see also that the dividend is increasing. And like Karin said, we don't have any loans and a very strong financial situation, and our dividend -- proposed dividend is, of course, a reflection of that. With those last words, we open up for questions. So, operator, over to you.
Operator: [Operator Instructions] We will now take the first question from the line of Adela Dashian from Jefferies. Please go ahead.
Adela Dashian: Yes. Good morning, Max and Karin. Yes. My first question relates to the seasonal patterns in your business, and especially since you’re -- the bike helmets are being produced in Q3 and Q4, and Q3 was a weak quarter, but you started to see good, positive developments in Q4. Should we expect that this will spill into Q1 as well this year? And also, when it comes to the development of snow helmets, I think that previously, the first half has been pretty strong as well when it comes to production of snow helmet. So, I don't really understand the comments in the press release about customers not being willing to put in new orders in order to yes, reflect the current environment of low inventories. Those are the two questions from me first.
Max Strandwitz: Yes, thank you. I will try to answer and then if my answer is not complete, you ask again. So, I think, first of all, normally, the historical patterns, like we have said before is, Q3 and Q4 is really about bicycle helmets, and then Q1 and Q2 has historically been more about snow helmets and so on. Of course, we do see that the seasonal patterns has even out a little bit, especially what we have seen in the change of the market conditions and so on. Snow is actually not particularly big in Q4 normally. So, historically, we have been at around 80% share of bike production of the total sales of MIPS and this year was no exception. So we were close to 80%. Last year, the snow helmet sales was around 20% of the sales, and this year, it was only 10%. So, of course, it has an effect on the total sales, as the total sales is still not that high, and of course, deviations in millions makes a big impact on the total sale. Then when it comes to what did we actually see, I think it's very important to say and separate from what are the long-term trends, and anyone following MIPS knows that we have had fantastic development in our subcategory snow over the last three years. Despite that, it has been a very challenged market and we have delivered a lot of growth. We do not see that changing. We still continue to develop a lot of helmets. The sales that we will see in Q1 and Q2 is not for repeat orders within the season, it's actually for the production for next season. And given my comments also on the lower inventory levels that we see across the globe, we are not that worried when it comes to the snow category. What we saw in Q4 is that the repeat orders that you normally have during a season, when you sell out of your first orders, then you normally place repeat orders. That didn't happen to the same extent. Not that there is not the need, but everyone is extremely careful about their inventory levels. Everyone is extremely careful about carrying any stock into next year. If we look at the start of this season, Europe had a fantastic start of the season. Most ski resorts opened more than a -- months earlier than they normally did. And now it also starts to come a lot of snow into the American market. So, we are not that worried about snow. It's more of a short-term impact rather than a long-term impact. I hope that answer your question.
Adela Dashian: Yes, that's super helpful. So, when you say short-term impact, we should think of it as having more of an effect in Q4 rather than in the first half of 2024 because they're building inventory ahead of the next winter season, right?
Max Strandwitz: That's correct.
Adela Dashian: Awesome. And then, in the bike helmet category, should we expect the spillover effect then, if the end market trends are a bit more favorable this year versus last year?
Max Strandwitz: Yes. I think when it comes to bike, actually there, the trend is really our friend, because of course, we have quite soft comparators in bike, and that's what we will start delivering growth against. And then also that we, like I explained, we see that our customers start buying from us. We do not expect any market growth. So we expect that the markets as such will be quite challenged. The impact and the growth in revenue that you will see in bike is basically coming from that -- our customers is now starting to buy from us again rather than eating out of their own inventory. And the share of the total sales of MIPS in bike will increase the following quarters because, of course, as the production starts ramping up again, it will be a more material part of the total sales.
Adela Dashian: Great. And then on Safety, I was a bit surprised that we didn't see additional volume ramp-up in the fourth quarter. Could you talk to why it is taking maybe a bit longer than anticipated at the beginning of the year? And then also related to Safety, the government initiatives that you mentioned earlier in the call, some more color on that, what regions are you seeing those in? And, yes, to what extent did those relate to the end markets?
Max Strandwitz: Yes. So, when it comes to Safety, since we are still early in the journey, sales will be a little bit erratic. If the current run rate that we saw in Q4 reflecting what we are going to see going forward, we truly don't see that and truly don't hope so. We see, of course, more material sales going forward. But it could shift a little bit quarter-to-quarter. We have launched a lot of helmets. We see that we have been also challenged in terms of certification of new helmets coming out on the market. There is a lot of things happening. Things takes a little bit longer, not on the MIPS side, but more from test institute to get products out and so on. We have gone through an extreme heavy agenda when it comes to new trade shows and so on. It was A+A in October and also NSC. And now, in January, we had also the World of Concrete. There you have a lot of new MIPS helmets that will hit the markets coming quarters, and you will also start to see that the sales is picking up again. So, you will see good quarters and worse quarters in Safety. But the trend for sure is there. If you look at the full year performance, we are growing 181%, which is, of course, slightly ahead of the plan that we set up, and we are happy with that.
Adela Dashian: And on the government initiatives...
Max Strandwitz: Yes. So, in the U.S., there is an authority which is called OSHA. And OSHA have now gone out and said that all of their employees, and OSHA is like the safety regulatory body for the U.S. market, and they also put out a lot of recommendations and so on. And they have said that they want their employees to have the right helmet for the right purpose, which is, of course, a good start. But they're also advising their workers to always wear a type 2 helmet. And they have also communicated that they will believe that a lot of the helmets that will be sold in coming years will also transfer into -- or into type 2 helmets, which is, of course, what we also see. We see a big interest from construction companies upgrading their helmets. We see less and less type 1 helmets on the market and also a much higher willingness to pay, especially on the U.S. market. So, I'm really happy that also authorities that normally are the last in line is also pushing for better and more advanced helmet.
Adela Dashian: Great. And then just finally, something that we've noticed in the market is that there's been some brands that are highlighting that they're moving maybe away from incorporating MIPS in their helmets and rather offering as an add-on, separate purchase. Are you seeing that as well? Or is that just -- yes, to what magnitude is that affecting your business, if it's prevalent at all?
Max Strandwitz: No. Actually, we have not heard about that because it's against our business model. They are not allowed to add that on afterwards. The only category where we are seeing an aftermarket like that is in the Safety category. There, you can actually buy a new kit to implement in your helmet when you bought first the MIPS helmet, and then you want to change the inner content of the helmet, you can do that. No, we have not seen that customers are walking away from MIPS, and we have not seen any communication. So, I think if you can prove any evidence of that, it will be really helpful, because that's not something we see and also not something that we allow that you can have like an aftermarket product and add MIPS to helmet, because even technically, it's not possible.
Adela Dashian: Okay, perfect. Thanks for that clarification. That's all for me. Thank you.
Operator: We will now take our next question from the line of Daniel Thorsson from ABG Sundal Collier. Please go ahead.
Daniel Thorsson: Yes, hi. Thank you very much. I have a question regarding the new technologies you mentioned that are ready to launch to the market that has been kind of postponed in this negatively developing environment where I guess that the price points are somewhat higher than the kind of $5 unit, we could average the product portfolio at, back in the days. Can you give some comments on the level of price points for some of these new technologies just to get an understanding how it could drive growth on an equal volume basis into '24, for example?
Max Strandwitz: Yes. Yes, as we -- normally, MIPS doesn't increase the price through just doing -- price increases normally is, of course, we increase price through innovation. We have launched a lot of new technologies. You see a lot more integrated solutions that we bring into the market. And of course with those, normally comes also a higher price. And if you say, look at the latest technology that we have launched, it's about twice as expensive as the average MIPS price that you see on the market at the moment.
Daniel Thorsson: Okay, that's helpful. And then secondly, on OpEx development in 2024, where should we see increased costs coming? Is it in R&D or sales and marketing to capture the recovering bike market, for example?
Max Strandwitz: Yes. So, I mean, we have, of course, a very long-term agenda when it comes to R&D. So there, you will still see some investments and so on to be able to deliver on our strategic plan. When it comes to marketing, we are still investing, but in percentage points, it will not be to the same extent that we did in 2023. So in absolute, it will be a small increase; but in percentage point, it will actually be a decrease versus what we saw in 2023.
Daniel Thorsson: Perfect. That's it for me. Thank you.
Operator: We will now take the next question from the line of Karl Oskar Vikstrom from Berenberg. Please go ahead.
Karl Oskar Vikstrom: Yes. Hi everyone. Thanks for taking my question. I guess, I mean, as you put it here in the presentation, now the sales will reflect more of the market sellout. I guess my question is twofold. I mean, if we look at bike, I think you said at the CMD here, what is it, two years, give or take ago, 35 million helmets we're looking at. Do you have a sense of where the market -- like, if you index the market to that level that you had at the time and what the kind of expectations are in '24, is it kind of like a full recovery? I mean, you're telling me it's not growth, but kind of where do we sit compared to that level, just to get a sense of where we are in the market in terms of volumes right now for '24?
Max Strandwitz: Yes. So, in our long-term assumption, which we also communicate when it comes to the 35 million that we talked about during the Capital Markets Day. That was, of course, a snapshot of the market at that time. It assumed that the market had grown around 10% versus what we saw in 2019. So, it doesn't include a dramatic pandemic boost as such. If you will take the market today, even though people say that there is more riders now than it was before the pandemic, we still assume that the CMD number that we communicate is on the low side and still reflecting the market situation. There has been a couple of markets which we maybe didn't reflect as fair, like the Asian market is a lot bigger than we assumed, but it doesn't really matter because a lot of those helmets are not in our price point and not up for addressing at the moment. So I think 35 million is still a fair assumption. Everyone believed that the market has collapsed, but that's against a much higher number and that's against the peak numbers that was in 2021.
Karl Oskar Vikstrom: Yes, okay. And just to -- I mean, you're saying it in the report, but the sales in '24 would basically be that there is no more kind of inventory destocking?
Max Strandwitz: Yes. Customers have still inventory, of course, like any customer would have, but they don't have that big excess amount of inventory that they had in 2023, which hampered our opportunity to grow.
Karl Oskar Vikstrom: Yes. No, that's fair. That's clear. Okay. And then, I guess the second question was just on Safety again. I know you mentioned slightly longer lead times to get these things to market, get approval and so forth. I mean early last year, you were kind of saying, expecting SEK 20 million to SEK 30 million in sales. We finished the year up at SEK 12 million. And so I'm just thinking, sort of looking into this year, do you have any kind of outlook? Are we getting back to that sort of whatever, SEK 8 million to SEK 18 million in kind of Q1, like these delays, how long are they? When do you expect to kind of catch up on that lost volume, let's say, that you're anticipating?
Max Strandwitz: Yes. So, what we have said before is that we expect to double our sales every six to 12 months. And if you do SEK 12 million in 2023, it's getting closer to become something like that SEK 20 million to SEK 30 million. So maybe one or two quarters out, and then we will be at the run rate of SEK 20 million to SEK 30 million.
Karl Oskar Vikstrom: Okay. That's clear. That's all from me. Thank you.
Operator: We will now take the next question from the line of Carl Deijenberg from Carnegie. Please go ahead.
Carl Deijenberg: Thank you. Good morning, guys. Following up on Safety again. Maybe if we could talk a little bit about these new partners that you've added here in Q4. And if you could also give us a recap, now in total, how much of that addressable market that you showed us on this are those 15 partners addressing? And then secondly, also here, going into '24 in this category, is the focus now ramping up with the partners that you have or are you still looking to adding new partners? Or is the sort of portfolio with the ones that you're having is at a satisfactory level for this year?
Max Strandwitz: Yes. I don't think we will ever be satisfied or I hope that we never be satisfied. So, of course, you will see more launch of more partners during the year. You're right, we have 15 partners that we launched with so far, and there will be more during the year. When you look at how much they actually represent, it's a little bit more than 30% of the addressable market. That's, of course, the total sales of their helmets, and it is not reflecting only the MIPS part. So, we have got access to a significant part of the market. In Q4, we launched two new partnerships. One is, of course, with MSA, which is one of the bigger, if not the biggest player in the construction space, especially in the price points we are addressing. So there, of course, we are super happy to have them on board as a partner and also a very strong evidence of what we're doing and so on. And the other one that we also launched, which was a LIFT Safety, which is really strong in the retail space in the U.S. market, high price point. Normally, their helmets are sold at around USD 100 to USD 200. A lot of the independent contractors is buying those type of helmets. So what we are strategically really pleased about is that we start to cover all the white spots in quite a nice way. We had some really strong industrial players, of course, and that we now also can cover the retail space in the Safety category, we are really, really happy about.
Carl Deijenberg: Okay, very, well. Thank you. And my second question is around the balance sheet. I guess, you did an investment earlier this year with Quin, and your balance sheet, despite the volumes here, are strengthening every quarter, basically. So are you looking at further investments alike? Or how are you reasoning here, and maybe your own thoughts here. I guess this is more of maybe a board question, but buybacks versus dividends, why just not buy back more of an alternative that will be looked into now given how the shares have been performing over the last two, three years?
Max Strandwitz: Yes. I think, I mean, you did see the increase in dividends, of course, which is a significant step back and also a big payout of net earnings, of course. Buyback, we have the opportunity, but in the end, of course, it's a board discussion. When it comes to acquisitions and so on, of course, we want to do more if there would be opportunities, but there needs to be something that we actually feel that we can create a lot of value by adding to our portfolio. We did invest in the Quin Technology. That, of course, takes a lot of time. A fantastic technology where we really have created an ecosystem of data where we now have consumer accident statistics. We have a fantastic test lab, and we also, of course, have our computer modeling capabilities. That alone can keep us busy for quite some time. And also when you buy something, you actually want to make sure that you give good shareholder return on what you buy, and that's where our focus is at the moment. I think there is still so many more things that we can do with the Quin Technology, and that will really be our focus short term. If we identified something that will make the boat go faster or it will even create a better boat, of course, we will look at that. But at the moment, we are quite happy with what we have, and also having a strong balance sheet is also something that we always had as a priority for MIPS. And of course, when you go through challenges like we did last year, we still have the confidence to invest behind our strategic priorities. And it's, of course, a luxury to be able to do that. If the balance sheet becomes too big, then I'm sure that our very proactive Board will, for sure, address that.
Carl Deijenberg: Okay, very well. That was all from me. So, thank you.
Operator: We now take the next question. And the next question is from the line of Emanuel Jansson from Danske Bank. Please go ahead.
Emanuel Jansson: Good morning, everyone, and I hope you can hear me. Just looking in the short term, heading into Q1 and soon also Q2. I mean, you have seen a trend shift within bike. Seems like also the inventory situation within the snow segment is quite good. How should we pencil in? I mean, the motor sales in Q1 and Q2 here, what was their sales figures last year? And will we see any improvements in the inventory situation demand in Q2 at least?
Max Strandwitz: Yes. Your question is now relating to inventory and Moto specific, right?
Emanuel Jansson: Yes.
Max Strandwitz: And I think, I mean, in Moto, we actually see the perfect storm, but a very strange situation because in Moto, we actually see that, that category is actually the first category that introduced rotation motion in the testing, implemented a new standard, which of course, should be favorable for MIPS. What I think everyone underestimated is the inventory of old helmets, so basically, relating to the standard ECE 22.05, those helmets are now starting to be sold out from the market, and of course, everyone is bringing in the new helmets. that's also why we are more confident in the motorcycle category. I will not put too much hope on Q1. When it comes to Moto, we still don't expect to deliver growth. But as we go into Q2, we start to see the trend going upwards again. And of course, we still see that there is a great opportunity to deliver growth in the full year also for Moto.
Emanuel Jansson: Great. Prefect. That's very clear. And in Q1, could decline of Moto sales be replaced by maybe improved bike sales then?
Max Strandwitz: Yes. As the magnitude of, so to say, the Moto category and the decline, I don't expect to see the 66% that we saw in Q4, but actually an improvement with that. So it's a less negative impact to offset.
Emanuel Jansson: Perfect. And can you say anything on the start of Q1?
Max Strandwitz: Yes. I mean we actually -- and that, of course, is a little bit strange situation. We have seen continuous increase in order intake. We have seen a positive development there, and that has not changed.
Emanuel Jansson: Perfect. And looking at orders you are receiving, is that typically on your more safer options when it comes to what the consumers want, like big volume helmets or is it new helmets that you're getting orders on?
Max Strandwitz: No, I mean, we see a mix of both. I think what is, of course, reassuring for us is that we have seen also and we started to see that already in Q4, is that the inventory levels of really the big sellers to -- so the volume drivers in the bicycle category has normalized. And of course, as you see them being on a normal inventory level, that's also where you see a lot of the volume contribution and so on. So it will be an impact of both. But of course, the biggest impact is that we go back to normal sales on our volume heroes, as we call them.
Emanuel Jansson: Perfect. I think that was all for me.
Operator: We will now take the last question from the telephones. And the question is from the line of Karri Rinta from Handelsbanken. Please go ahead.
Karri Rinta: Yes, thanks for taking my question. I'm still trying to wrap my head around your guidance or this outlook comment that your sales will reflect the sellout numbers, but -- and maybe specifically about bike, yet you don't expect any market growth in 2024. So, the first question, am I correct in assuming that you are expecting that your bike helmet deliveries will increase in 2024? That's my first question.
Max Strandwitz: Yes. You're right that it will do. I think -- I mean, when we -- and my apologies if we haven't been clear in explaining that what happened in 2023 is, of course, that you could have a customer that actually sold 100. But given that they sold 100, they took maybe 80 from their own stock and only 20 they bought from MIPS. What we expect going forward is that the customers actually will buy what they need during the year from us, and it doesn't mean that they don't have any inventory, but they will have the same inventory levels as they have today also when they end the year. And that is the big difference that, last year, instead of buying from us, they were eating out of their inventory and so on. And that is really the big change and also the key growth driver. I will be super happy if the market starts growing again. But I think with consumer confidence and also the challenges that we see with consumers all around the world, I don't expect to see that.
Karri Rinta: Okay, that's clear. And then maybe a follow-up on that. What is your best estimate of sell-out of bike helmets in the U.S. and in Europe in 2023, growth rate?
Max Strandwitz: Yes. I think, I mean, if you look at the sales out, U.S. market was probably somewhere around 10% to 15% down and Europe was probably somewhere around 15% to 20% down.
Karri Rinta: Okay, all right. And you made some comments about the Moto order books and order outlook. So I guess the same positive outlook applies to the bike. But is there anything more tangible that you can give us in terms of order books now versus a year ago?
Max Strandwitz: In terms of motorcycle?
Karri Rinta: No, bike. Bike.
Max Strandwitz: Yes. I mean, as we say that we see a positive impact, we saw that already in Q4. And of course, we were back to growth. So, of course, it's bigger than it was a year ago. We see a little bit of a change in behavior with our customers is that we get a lot more orders all the time, but we also get a lot more frequent orders with smaller size. So, we see that everyone is ordering more frequent, but less per order. So these volume chunks that we saw before, they don't exist anymore. Normally, customers order basically every week, because they are much more careful about their inventory management. And I think that will be really a key topic also for 2024. But of course, in terms of size, it is bigger than it was a year ago. Otherwise, it's really difficult to deliver growth in the bike category.
Karri Rinta: All right. And then finally, any news to report from China, maybe into Vietnam? Anything that has happened in the last three months. And then these Red Sea disruptions, is that something that your customers are worried about?
Max Strandwitz: Yes. So, I mean, there is, of course, a lot of onshoring when it comes to production in China. For us, it's not the major problem. We can move our tools in just a matter of weeks. And of course, we follow our customers. So, where our customers will produce, of course, we will need to produce in the same place, and that's what we always try to do. So I don't see a lot of drama. But of course, you see a lot of attention of being much closer to your home market and so on. We have done a lot of initiatives to open up production in Europe. We also see that there is three factories opening up in Vietnam and so on. And of course, we will follow wherever that production is. So, that is something that we have a big focus on. When it comes to the Red Sea, so far, it has been limited impact. We haven't seen any delays relating to our ordering because of the Red Sea conflict. But of course, I think anyone that is following the conflict now sees that freight prices are increasing really, really quickly and actually quicker than it did at peak COVID situation. We see that freight prices have increased with around 3x versus only a couple of months ago. So, we do see that there is an increase. Of course, MIPS as a company, always deliver x work. So, we are not really impacted that in the first instance. But of course, longer term, if freight prices continue to increase, I think everyone in any industry that has a lot of freight, of course, will be impacted in one way or another. But so far, we haven't seen a lot of impact.
Karri Rinta: All right. Thank you. Thanks for taking my questions.
Operator: Thank you. I would now like to turn the conference back to Max Strandwitz.
Max Strandwitz: Yes. So we have got a couple of offline questions. So the first one is, what is the MIPS growth strategy for the Chinese market?. And of course, we have seen quite strong development in the Chinese market, the last year actually. It has started to become a more material part of our sales. And our strategy has been really to focus on a couple of brands for the Chinese market. We see a very interesting market when it comes to e -scooter, for instance, where you see a big trend, and also there is a new helmet law in China that indicates that you actually need to wear a helmet when you are riding an e-scooter and so on. And of course, we start to see some interest from that. We also see that bicycling in China is increasing and we have seen that there is a lot of indoor snow resorts that is being built and so on. So, we see that a bit opportunistic. Of course, we want to protect as many people as possible and so on. But we haven't decided yet if we would have a more aggressive strategy in China. We have seen a lot of growth. We have managed it opportunistic, and we will not change that short term. Then we got the question on what are the ASP per category?. That is not something that we have disclosed. We are always referring to the average sales of the MIPS technology, which is somewhere around USD 5 to USD 6. Then there was one question, if we can share the EBIT margin per category. That's also not something that we have disclosed as we don't do any segment reporting. But our financial model is quite simple. We try to attract a gross margin of 70%. And then, of course, we have a very scalable business model, and that's why we try to achieve a 50% EBIT margin, which is also the same as our financial target, and that doesn't actually differentiate between any of our category. MIPS is a relatively small company and we don't like complexity. And then we got the question, it's a very long question, but what do you mean by growth in biking in Q4? So what we saw in Q4 was in volumes and in net sales, if we isolate the bike category, we actually saw growth in that category. Then we also got a question on what do -- or what does the normal market look like in bike and which year is the most appropriate benchmark. Of course, I think there is still a lot to be seen when it comes to the bike market and what the new normal is. Like we referred to before, our addressable market is 35 million. That's based on a 3% increase versus 2019 per year, which means that when we had our Capital Markets Day in 2022, we saw a 35 million market. If we compare against 2021, which was, of course, the peak market, the market was a lot bigger. I think a lot of people will fool themselves if they will reference 2021 as the big market as there was a lot of pumped-up demand from the COVID effect that we saw. So the 35 million we communicated, that's what we consider to be the normal market. And then how has the progress been in our lower price point segment? So, we had a couple of initiatives when it comes to the lower price points. The first one was to increase our share of the sales in the sporting goods, which has been very successful, and we have done that. And there, we're actually seeing that most selling helmets are now equipped with the MIPS technology. We also had some initiatives into Walmart, which has also been launched and is also working well. And then we also have a great collaboration in the lower price points also with the Decathlon. So we are happy with that development also. So with that, thank you for listening in to our Q4 year-end report of 2023. I hope that you have a great start of the year and speak to you again next time. Thank you for listening in.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.