Profoto Holding AB (publ)
STO:PRFO
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Hi, and welcome to Profoto's Q2 Presentation. My name is Amanda Astrom, and I'm Head of Investor Relations. 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 sharing some highlights for the quarter.
Good morning and hello to everyone. Nice to see you here. Thank you for joining the call.
Our second quarter this year, our net sales increased with 9% in the quarter. But organic growth was adjusted for currency effects and was decreased by 13%. So we have both good and not so good effect. But the growth was affected mainly by late deliveries of components. And we do not believe that this -- we only believe that this is a short-term problem, and we believe that the full year will not be affected by this.
We also had 2 great product launches in the end of the quarter, the 22nd and the 29th of June, of the A2 and of the Connect Pro. And we are very happy with the launches, and we foresee good sales of those products into the future, into this quarter, coming quarter. So we see a profitable quarter with a net sales of plus 9% up to SEK 187 million. The EBIT was good, 48%, up 33% from last year with an EBIT margin of 26%. And as you can see, we continue to grow, which is good, up to SEK 791 million last 12 months, and that is a 27% growth.
The EBIT is good, SEK 239 million, and with a good margin of -- healthy margin of 30%. So let me talk a little bit of Profoto. As you know, Profoto, we are the leader in a global niche with rather high barrier to entry relative to the size of the market. We are selling our products mainly because of our brand and that we are used by the very best photographers all around the world.
We have a long history. We were founded in '68 by Conny Dufgran and Eckhard Heine. So we have a long experience of supporting professional photographers worldwide. We are focusing heavily on customers, and we bring quality products to the market, and that's what we do in order to grow. We are an entrepreneurial focused company. So we try to do a lot for customers. And we outsource a lot of our activities -- of operational activities, which means that we need to have, and so we also do, competent and dedicated management and staff with a long proven track record.
So as I said, we are the world leader in lighting products for professional photographers, and we are active in what we call the growing image and content creation market. We enjoy a premium position in the segment of photography lighting solution. And what we do, we do products for -- that are used by the best photographers to shape light and create great images.
And as I said, we're used by the best, we sell all around the world. We focus on -- mainly on organic growth and high margins. This means that we need to invest, and so we do a lot of our efforts into innovation and bringing new products to the market. This also means that we're not focusing on ourselves, but we are outsourcing, for instance, our production. And this also means that we need to have a lot of managers, and we need to have great staff, and so we do.
We are part of the attractive and fast-changing image and content creation market, that this market is huge. And we are the leaders in one of the niches called the lighting solution market. The size of this is relatively small. It is around USD 1 billion, which was the global market size pre-COVID. This market -- the growth in this market is driven by the number of images used and posted on the Internet. And the graph to the right is depicting exactly that, how the growth is more or less exponential in this respect.
As I said, we focus a lot on innovation, a lot of product development, and we try to spend around 10% of our sales back into product development. This quarter, we launched the A2 and the Connect Pro. But then what you see on the image here is the A2, which is a small handheld or the world's smallest studio light basically. And we also launched the Connect Pro, which is the compatibility and the connectivity solution between the camera and the flash in order to support photographers when they're creating great images.
So at the time of last year, at the time of IPO, we communicated our strategy, which is based on organic growth in the black area here. We talked about that supporting still photographers when they are creating great images. We also pointed out 3 areas for possible growth. And number one was, at that time, the smartphone photographers. Photography for professional photographers. That is number one. And today, Profoto has an extraordinary good solution for those who wants to use their smartphone when they are shooting and creating great images.
Number two, also light for moving images, which we also are looking into. And number three was more industrial or e-com workflow solutions. And that's why we invested in StyleShoots, in this area -- in the orange area here marked in this image. The 4th of -- sorry, the 6th of April last quarter.
So let me talk about StyleShoots. StyleShoots is based in Haarlem and sales around EUR 9 million with a healthy EBIT margin and 40 dedicated great employees. So we paid EUR 18 million in cash for the shares in StyleShoots, which corresponds to an EBIT multiple of 12x EBIT 2021. And CEO and CFO have undertaken to acquire Profoto shares in the stock market.
So StyleShoots, they provide a workflow software for large studios, especially in e-com, to actually ensure consistent high-image qualities for selling basically apparel, footwear and accessories on the Internet. This shortens the time to the market for the e-com companies, which is crucial for their profitability. And it's based on high productivity. Everything. And they do this in order to increase conversion of the traffic that actually arrives to their web page and minimizing return by depicting the products in a good way so that you actually get what you see.
So in addition to this software, they also provide 4 types of hardware. First is the Horizontal, the Vertical, the Live and Eclipse. All of them are dedicated studios for different kinds of photography or content needed in order to sell products online. That's basically it. We are very happy with the first quarter, and we have come a long way with the integration, but we will continue to do that and work together and bring these 2 product lines together.
Thank you very much. I leave the word to you, Petter.
Thank you, Anders. My name is Petter, I'm CFO of the company. Let me short summarize the investment case as we went to the market a year ago.
We are leading brand in a niche market that is growing 3% to 5% per year. We are the premium brand and is approximately twice as big as the nearest competitor. We have a huge dealer network acting globally that is significantly important to differentiate us from the competitors. We operate with a very asset-light business model and high profit margins and done that for quite a long time.
Next page, please. So Profoto have been in the business over 50 years. The last 20 years, we have grown 12% year-on-year. The last 5 to 6 years, we have had an EBIT margin in the range of 25% to 30%. And that's also reflected in our financial targets going forward.
Next page, please. Now looking at the quarter and the regional sales. The regional sales has been fairly stable on each region. There were no any major changes. In Europe or the EMEA, it has increased significantly, mainly because of the added sales from the StyleShoots, and StyleShoots is today mainly operating in Europe, although they have some minor sales in other markets.
Next slide, please. We have had a number of high level of EBIT margin. In the margin now, we delivered within our margin range that is 25% to 30%. This was on the low side, 25%, and that was mainly driven due to the lower postponed sales that Anders talked about due to the delay of components and, to a less degree, of the lower margin added by StyleShoots since they operate on a lower operating margin.
Next slide please. So if we look at an overview of the financial targets, we are year-to-date and on the quarter within our EBIT margin range, but we are behind on the growth as a consequence of the postponed sales, as described.
So next page, please. So that's all I had financially. And time for questions.
[Operator Instructions] Your first question comes from Karri Rinta from SHB.
Karri, Handelsbanken. A few questions from me. Firstly, this delayed components, can you confirm that this is related to lockdowns in China? And is this one specific supplier that was shut down during the quarter or was this a more widespread problem? And has it been fully resolved now?
Petter, would you like to take that? Answer that question, please.
We don't disclose which region it is related to, but it is a specific event related to specific components for a specific group of products. As we consider it a onetime occurrence, we don't see any similar patterns that had a material effect this quarter.
Can I ask a follow-up? Is there a reason why you don't give any specifics?
I don't know actually. Maybe we can come back to that and discuss it. We haven't discussed -- we planned not to necessarily disclose the details, but if you find it important, we may be able to inform more in detail.
No, it's just that the -- I was just in another conference call and they had the exact same problem and they explained that it was one supplier in China, and then that supplier was shut down for most of Q2 because of the COVID lockdowns and that was very helpful. So I guess my question, maybe a follow-up, would be that -- is this any way related to your European EMS supplier and their factory in Russia? So is this Russia related or China related?
It's related to one of our major EMS. And we could be more specific which supplier, which regions, but we haven't talked about if we should disclose that or not. I don't know if it's -- So I believe that we need to talk about it before we inform the market. We can do that just after the meeting, but we just need to discuss together if there is any reason we should disclose it.
Fair enough. Then the -- I don't know if it's -- if you can sort of separate between what was supply related? However, maybe -- I mean, with many discretionary categories, we have heard from many companies that there has been some slowdown in end user demand. So I'm not sure if you mentioned anything around that in the release or if you can discuss if you have seen anything maybe -- Yes, if you can discuss anything about the end user demand and any shifts and changes that you might have seen during the quarter.
So what we do, we see some hesitance from the market, from individual photographers. We see -- but on the other hand, we see from big large brand studios, we see an increased demand on investing in their capabilities of creating content for their brands in order to drive sales on the Internet. So we have a mixed demand situation among our different customer groups. But it is not so that we see a sharp demand. We have seen some hiccups, but we foresee -- we think that we have a stable demand and -- but we had some issues of especially component deliveries in the quarter. And this is the reason why sales is like it is.
Okay. And then finally, can you remind us of your sort of typical seasonality during the year? Because recent years, last year, you had the reopening that sort of skewed the typical seasonal patterns. The year before that, it was the pandemic, and then you have these product launches that can have an impact on it. But how do sales typically develop during a year between different quarters?
Underlying Q3 is normally the weaker quarter, weakest. And there is a pattern that the Q4 used to be the strongest. This quarter, as we have described, however, even though Q3 underlying may be the weakest, we expect spillover now from sales that we couldn't deliver in Q2 due to the components. And to some degree, potential -- a higher increase in China where it's a matter of week-by-week measurement, how much sales increase when they open up and it goes back and forth. But if they do open up quickly, that may have an impact or will have an impact.
All right. That's helpful.
[Operator Instructions] As we are showing no further questions, I will hand back for closing remarks. Thank you.
Great. Thank you for today and your questions. I just want to give you a gentle reminder about our third quarter report, which will be published on November 8. Thank you for today.