Profoto Holding AB (publ)
STO:PRFO
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
44.7
83.7143
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Hi, and welcome to Profoto's Interim Report for Q1 presentation. My name is Amanda Åström, and I'm Head of Investor Relations here at Profoto. Today, I have with me our CEO, Anders Hedebark; and our CFO, Petter Sylvan. I will now hand over to Anders, who will start off by giving you some highlights for the first quarter.
Hi, everyone, and welcome. Nice to have you here and listening to our presentation of the Q1 report, the first quarter.
I would like to start with what are the highlights for the quarter. And we can see that e-commerce's need for good images is continuously increasing. And this is really what is driving our sales this quarter. And the reason why they need better lighting equipment in order to create great images for e-commerce purposes is that great images taken in good -- with good lighting, it increases both the traffic to the website, the conversion when you arrive at the website and also reducing returns, which is very important for e-commerce companies.
This is for all types of e-commerce companies. But starting with high-end brands that are also putting a lot of effort now into this area like Louis Vuitton, Moncler, et cetera, and high-end fashion brands. But also other brands that are -- other companies that are selling a lot of brands on the Internet.
So we had a 28% net sales growth in the quarter. And this is driven not only by e-commerce, but also opening of societies. And we are driving the sales by trying to do more sales events. But also we see events like fashion shows, but also weddings as well as other events is driving the need for good lighting.
We see good growth in the U.S. or the Americas and also very good in EMEA, basically Europe. However, in APAC, in Asia and Asia Pacific, we see a negative sales growth, and this is dependent on especially a reinforcement of restriction in more specifically, China, Shanghai, where we have our operation base.
So -- and shortage of components, we get many questions around that. It is a challenge, but we are managing in a quite acceptable way according to ourselves.
So the whole increase of the need for better e-commerce images or images for e-commerce purposes has driven us to put more interest into this area. And this is the reason -- the overlying reason why we acquired StyleShoots, a Dutch-based company in Haarlem outside Amsterdam. And this is to strengthen our position in automated e-commerce photography, to make it more simple, easier for operators and photographers to create great images and fast, do this fast for e-commerce companies.
Let's go down to figures. So the net sales in first quarter was SEK 196 million, which is an increase of 28%. We had an adjusted EBIT of SEK 65 million, which is plus 37% from last year. And this is based on good sales and especially on good EBIT margin of 33%.
Look on the full year figures, last 12 months, now we are back on exceeding pre-pandemic full year figures. So the last 12 months, we did SEK 776 million, which is a 46% increase. EBIT is up heavily to SEK 254 million, and the EBIT margin is 33%. What is also interesting is if we look on a pro forma, if we include StyleShoots into the figures, our sales would have been SEK 868 million pro forma, with good EBIT margin.
So while -- when I have you all here and listening to me, I would like to give you a brief update or tell you about Profoto for those of you who haven't heard this before. For those of you who have heard this, I think it's a good repetition. So we were -- we have a long, long history in studio photography. We were founded in '68 by Conny Dufgran and Eckhard Heine.
Eckhard to the right here, he said, "I will build the best flash." And Conny to the left, "I will sell it to the best photographers." So we tried to take the premium position already from the start.
And so they did, and I have been in the company for now 25 years. I started in '97. I added more customer focus and higher quality for products for growth and bringing a lot of entrepreneurial spirit and drive into the management of the company. And Petter who joined 2009, added more even better growth and profitability and more -- as the company matured.
So who are we? We are the world leader in lighting products for professional photographers. And we are active in the growing an interesting market of content creation, which is growing rapidly. We have the premium position in one of the segments called Photography Lighting Solution. And what we do, and we do innovative and easy-to-use flashes and light shaping system for professional photographers. They are used by the world's leading photographers. We sell our products all around the world, and we enjoy organic growth and high margins. That is our focus.
This means that we need and we are happy to invest heavily in innovation. But in addition to that, we are focusing on operational efficiencies. This means that we try to outsource everything we can, especially production, which means that we have a very asset-light balance sheet. This means also that we have a lot of managers, and we need to hire great staff, and so we do. And we -- one of the things that we say we're only hiring the very best in order to drive our business.
So like I said, we were active in the image and content creation market. The lighting solution market is around $1 billion, and this is pre-corona figures. We did a market study in 2019 in order to verify that. And our growth is driven by the image that you see to the right here, that the exponential growth of the need of great images in order to drive product sales and other reasons. So this is the -- what is really driving the underlying growth of our market.
We invest around 10% of sales back into R&D. This is the average in '18 to '21. We have more than 45 employees, full-time employees. We also use a lot of consultants. We are working actively to support this with the patent portfolio.
So this is what we said when we quoted in terms -- last year in July when we got quoted on the Stockholm Stock Exchange.
We also said that we are going to drive the business, reach our financial targets in the black part of this image. That is profitable growth and reach our financial targets that Petter will talk more about in a while.
In addition to this, we were going to grow in -- try to grow and look into growth avenues in 3 areas: smartphone photography or actually lighting equipment for smartphone photography for professional smartphone photography; light for moving images, especially for cinema, but also for video, et cetera; thirdly, to grow into more workflow solutions for industrial or basically e-com photography.
And this is the reason why we acquired StyleShoots, which I will talk more about and explain a little bit more about right now. So we acquired StyleShoots in the beginning of the quarter. StyleShoots is a Haarlem-based company. We closed -- we both signed and closed the deal April 6 this year -- last year -- a month ago. The company has a sales of EUR 9 million, 41 employees and have an acceptable and good EBIT margin. And we have great staff.
So basically, when we acquired this, we reasoned the following. Number one, we acquired the competence. And this is why we were very happy that Tom van Soest and Chris Schäfer committed to invest in Profoto shares and committed to keep them for 12 months.
Secondly, it is the way to the market. StyleShoots has a great brand, a great sales organization, especially in the European market. And thirdly, they have fantastic products and one of the products you see here on the image to the left.
So what the company does is especially developing a workflow software for the growing e-com photography -- studio photography market. And the reason is that you want to have consistent high image quality. You want to shorten the time to the market, meaning when you have the apparel, the footwear or the accessory coming in through the door of the e-com company, you want to put it up on the web as soon as possible in order to start selling the product as soon as possible.
So high productivity is key. And the reason is also why you need high-quality images, if you need to increase the conversion, increase the traffic, increase the conversion and minimizing the return of the goods. And this is what this workflow software supports the e-com company to do.
In addition to the workflow software, you connect 1 of 4 hardware products, and they are called Horizontal, Vertical, Live or Eclipse for doing different things. And this gives Profoto now the ability to connect software with hardware and attract the growing market of e-commerce for the studio photography.
So thank you very much. I will leave the word to Petter that will take you further into more details and figures, investment case and sort. Thank you.
Hello, everybody. Petter, I'm the CFO of the company. And let me start to summarize the investment case.
So we are a leading premium brand in a global niche, which is growing 3% to 5%. We are big in this niche, twice as big roughly as our closest competitor. We operate with an asset-light business model, where we focus on profitability, profitable growth and also increasing our addressable market. Our dealers, approximately 270 dealers in 62 countries, is extremely valuable in driving our growth and it's also a high barrier to entries for competitors. And we have done this for quite a long time, for 20 years, high profitable growth.
So if we look over time, what it looks like. For 20 years, as I mentioned, we have grown year-on-year 12%. The first years, we had profits in the range of 10% to 15%. And then the last 5 to 6 years, we have increased it to 25% to 30%. And last quarter, exceeding that.
Now if we focus on Q1, we have grown particularly by expanding in U.S., where the demand and delivery capacity has been high. Europe is also performing well, while APAC is quite heavily still affected by the restriction, not the least in China.
And with strong sales and high operational efficiency, we continue to deliver high EBIT margins. 33% is well above our target. Our EBIT target is 25% to 30%. And we don't see this as sustainable as we do everything we can to try to invest as much as possible for further growth now when we are as high in the EBIT target range.
And summarizing and looking at the financial targets, we are exceeding our targets by far. And as I mentioned, not the least, the EBIT margin. And for the dividends, we have recommended that we will have a dividend per share of SEK 3.5 per share, which means 89% of the profit generated in 2021.
So that was the financial summary. And now we'll leave for questions. Thank you.
[Operator Instructions] Our first question comes from the line of Karri Rinta from Handelsbanken.
I have a few questions, mostly about StyleShoots. So firstly, do they have some meaningful large customers that you -- where you currently have no established relationship or a weaker relationship? So are you immediately getting access to some new customers? That would be my first question.
When doing the due diligence -- commercial due diligence prior to acquiring StyleShoots, we noticed that growth would have -- we made clear that Profoto has a very good position as a top brand of the e-commerce market like companies and big brands, which I mentioned earlier, Louis Vuitton, Moncler, et cetera, whereas StyleShoots, they sell to more generic type of e-commerce companies. That is e-commerce companies that -- like Boost is not a customer, but Boost, for instance, or large warehouses -- large department stores like Macy's. It's a big customer, for instance, in the U.S.
So there is some overlap, but they have a broader base of customers. They also sell direct to end users like Macy's, but -- whereas Profoto, we sell indirect through photo dealers.
Okay. All right, good. And that was -- that answered my -- one of my questions, which is the go-to-market model, which is that they sell direct and you sell more to the dealers.
So you made a comment about that they mostly sell in Europe, but also know you mentioned Macy's. So what's the rough split between -- of their geographic sales between Europe and the U.S.? And do they have any sales in APAC?
They do have some sales in APAC. The biggest market is by far the European market, even though there is very good growth possibilities within the European market, too.
In U.S., they are -- they have limited access to the U.S. market, I think. And we don't disclose detailed figures on this, but it is the best growth possibilities is for us jointly StyleShoots-Profoto where Profoto can assist through Profoto USA, our sales subsidiary in the U.S., to sell to the American market. And we hope -- as a matter of fact, we're doing this work as we speak.
Have you given out any indications on what's the percentage of hardware sales and what percentage of their sales is software?
And then a follow-up, is there any sense for any customer to -- can a customer buy only software? Or is it always bundled with your hardware?
It is always part of the hardware as it is right now. So we see this -- the whole product offering is split into 2 parts, software and hardware, as I explained, and 4 different kinds of hardware. So you cannot buy and there is no reason to buy software as a stand-alone.
However, in this split, it gives us a lot of opportunities to actually develop our product offering. So we have another tool in our product development possibilities in order to create great products and also develop the business model that we sell them through. So -- in the way to increase the value for the end users.
So this means that, for instance, to develop both putting Profoto light into the hardware equipment. It goes for connecting the software and developing the software in different directions and connecting to different kind of hardware. For instance, Profoto's already existing flash system. So there's a lot of possibility that this opens up for us.
Okay. And then one more follow-up. You mentioned that -- you mentioned Boost and Boost is not a StyleShoots customer, but is it because Boost is too small? Or is it because they have decided to go for an in-house [indiscernible] solutions.
I don't know. But there are other customers in them. One of the biggest customers is Macy's. We have signed a big deal with El Corte Inglés in Spain, for instance. So there are this type of customers also.
So there's a lot of potential of increasing sales because this -- what is interesting with the market -- of the e-commerce market is really are matured. And if you look on different kind of -- it's like a factory where people actually do their own machines. And we are able now, with this total offering, Profoto is able to do a complete offering for e-com companies, which is the only one actually with high-end lighting and automatic machines and photographic machines. All kinds of photography Profoto is able to offer.
So we see great possibilities in selling more of existing products and also continue what we do the best, launching new types of offering to the customers in order for them to actually, as I said before, increase traffic to the brands through their websites and increase conversion and also minimizing return.
So we are -- with this, it's the first pillar. Another pillar for developing a great offer to e-com companies. So one should see this -- it is great now and will be better in the future.
Good enough. And then just generally, there's, of course, a lot of focus on inflation and consumer confidence and whatnot. Then you commented in the release that due to lifted restrictions, we start to see more of the kind of events and behaviors that are supportive for you. But did you see anything -- if we look at the different months, January, February, March, April, how should -- how -- what kind of progression did you see or have you seen during the first 4 months of this year?
I mean, specifically, we have already commented that there has been a strong demand in Q1. And -- I mean we cannot detailed comment in Q2, but the only clear pattern we see here now is that China is struggling, both from a demand perspective and practical perspective. They cannot even, from time to time, get the goods delivered to fulfill the customers because their warehouse is locked up.
So China is very uncertain to say what -- or estimate what the sales will be. But for the rest of the world, it's a high risk as -- or probably uncertainties in this quarter, but we don't see any clear changes to what we have seen and also what is. The only real change is that societies have continued to be open up except China. And we don't have any prediction of demand.
So the APAC is -- the decline in APAC, it's all about China. There's no element of, for example, Japan or any of the other larger countries?
No, it's all about China.
[Operator Instructions] There seems to be no more questions at this point. So I hand the word back to you, speakers, for some concluding remarks.
Great. Thank you. Thank you for joining us today. Before we wrap up, I just want to give you a gentle reminder about our second quarter report, which we will publish the 22nd of July. Thank you for today.