Profoto Holding AB (publ)
STO:PRFO
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Hi, and welcome to Profoto's Q3 presentation. My name is Amanda Astrom, and I am Head of Investor Relations. Today I have with me our CEO, Anders Hedebark; and our Acting CFO, Linus Marmstedt.
I will first hand over to Anders, who will start off by giving you some highlights for the quarter.
Welcome, everyone. Thank you for joining. As you saw in our presentation, we say that we still have a cautious market climate or business climate, or that the customers are actually hesitating -- still hesitating [ somewhat ] to take the decisions to buy new flash, new lighting equipment. We are continuing though our work on investing hard in, or a lot in product development, and this shows in the figures.
Our net sales we dropped by 4%, but organically, the sales decreased with 1%. The difference here is the currency -- value of the currency over the period has changed. Our adjusted EBIT was SEK 30 million, which is down SEK 5 million from SEK 35 million, corresponding to an EBIT margin of 18%. The one of the -- of you that are following Profoto, you know that our target is 25% to 30%. I would like to say this is just a quarter, this is not for the full year.
EBIT was SEK 39 million after some changes from the adjusted EBIT, which is 24% of sales. Our return on operating capital was 32%.
Okay. As I said, we are continuing to increase or change or make our investments in new products. We are focusing mainly on three areas. Number one, we are launching new products. We are [ developing ] new products for our core, that is light [ for ] professional still photography. One example was not during this quarter, but during last quarter when we had a successful launch at the end of that quarter. Second, we are continuing to enhance our offering and workflow solutions for large studios -- large content creation studios, main for e-com.
Thirdly, we are investing in light for film production. And we launched, or we showed our L1600D [ at ] CineGear in the end -- or in June this summer. We will start to ship that product in the end of the quarter. In the second half, actually, of December, we will have minor shipments, which will affect the fourth quarter somewhat, but not a lot.
During the quarter -- Next slide, please. During the quarter, we have focused a lot on bringing new accessories, new light shaping tools to the market. We launched some of the products called Magnum Reflector White, a series of white reflectors, Magnum TeleZoom and Zoom reflectors.
In addition to this, next slide, please, we launched softboxes -- 2 types of softboxes, one Octa Silver and one 3X4 foot Silver softBox, and you see some example of that in the image to the right.
Lastly, we also launched a new kit for the A2, which has been very successful, A2 combined with the Connect, so that it's easier for the customer to buy that kind of product.
Then you could jump to the next slide, and I will hand over to you, Linus. Welcome, Linus.
Yes. Thank you. I mean, this is a slide we have presented before. And as you can see, during [ the ] last quarter years, the number of major launches has been somewhat lower than the long-term trend. And as you know, we are investing heavily in R&D with an expected number of launches during the coming period.
And on the next slide -- this is a very important slide. As you can see, the R&D spend has more than doubled during the last years. And what we now expect is to have, say a level of stabilizing this level in general spend.
Next slide, please. And in general, you can see that we have seen a cautious market with an underlying organic growth of minus 1%, as Anders stated. And yes, this is -- sorry -- just comment on the margin. Sorry. Yes, we [ were ] talking about the margin and the general market trend and the margin development.
Yes. So, the margin, as you see, is down, and it's basically dependent on that the sales is not according to the level where it should be, and this is the main reason why the margin is only coming in at 18%.
Yes. And as you also said, we have an earn-out release, [ revalidation ] of the earn-out liability of SEK 9 million, which has impacted the EBIT. So the adjusted EBIT is SEK 30 million compared to the non-adjusted of SEK 39 million.
And if we look at the 12-month period, we see that the rolling 12 months is stabilizing now on a trend of slightly above the 20% margin.
And what we have seen during the quarter is that we have seen a soft market in almost all geographies. But in the U.S., we had a slight increase and that's depending on some product specific shipments of some products in the -- especially in the U.S., which has had a positive impact. But in Asia, we also seen a decline of around [ 20% ], which is mainly affected by a sharp decline in China. And this is just to see that the return on operating capital is affected by our R&D spending.
And as you know, we have a very solid balance sheet. We have an net debt-to-EBITDA of around 1x. So, [ I mean ] we have a very solid balance sheet, which is important going forward.
And as we have stated, and then we have a long-term target of EBIT margin of 25% to 30%, and organic growth of 10%. And during the last quarters we have not really reached that, but we are really committed to reach this target going forward.
[indiscernible].
Great. So now we will open up to questions.
[Operator Instructions] The next question comes from Marcela Klang from Handelsbanken.
Couple of questions on the upcoming launches. Can you talk about the potential in terms of profitability impact from the upcoming launches? What kind of volumes are you expecting? Is this backed by preorders? What -- How much can you say about what you have in your books already by now?
As you know, we do not give forecasts -- future forecasting for next quarter, but what we can say, or for the coming year, there will be launches in the future. And that -- you can see that especially on the slide that Linus showed concerning the investments in R&D. Our R&D projects are 24 to 36 months. So it -- And sometimes you cannot say exactly when they will kick in. But we are looking forward to an increased activity in the market.
We are [ concerning ] preorders and how we do sell-in. We -- as you know, we sell -- have an indirect business model, where we sell to dealers all around the world. So, we try to sell-in to dealers so that they are stocked up and ready-to-ship products at the time of the product launch. So there -- you cannot -- And one of the things is also, when you look on [ my ] -- the second slide I had, we are investing depending on what kind of product we're launching. That is, if we're launching a product in the core market where we already have and we are replacing an old type of flash, we will see less effect on the figures, but we are -- but we will see some positive effect, but less positive in comparison if we are launching a product that is brand new to the market, and then you will see a [ clearer ] growth in the figures.
I cannot comment on volumes. I cannot comment on the specific effect and give you any guidance on that. That will be dependent on when we are launching and what kind of product and also how successful. We have to wait with that until the next quarter which we will produce, and we will show in -- when is that, Amanda? In February?
12th of February.
12th of February. Sorry for that, Marcela.
I guess then we'll just have to wait one more quarter. In terms of...
Quarter-by-quarter, I would say.
You mentioned the R&D projects 2 to 3 years.
Yes.
Are you also looking into completely new areas similar to video [ lightning ] and so on, or more new versions, replacement of products from your core market?
Yes. So, we are definitely investing in our core market by expanding our offering of product for still photography. This is what we call the core part, and the black part of Slide -- it is Slide #4 in the presentation. And the upper part, I would say light for professional photographers.
So we are investing, and you will see products coming in that area. The Pro-D3 that we launched in the last day of second quarter this year is exactly that, which is enabling studio photographers to -- in a more cost efficient way produce great images by focusing on lighting. So, there will be more products of that sort, both replacing and both also adding to the full product line.
Secondly, we are -- as we -- as said, we are investing in light for film production where we launched, or we showed L1600D, which we will start to ship, which is the plan in the end of December. So, we will have some units sold into the market. Here, we are focusing heavily on most energy, most light per kilo, per size of the product [ with ] a smaller, light, easy-to-handle product that will enable the gaffers and the director of photographer to set the light in a more creative way and focus on creating great footage in that market. We are doing that and we are keeping on investing in other products for that market too. But I cannot say when exactly we will launch those.
Thirdly -- and we have said we have the same business model for -- I should say also for selling lights to the core market, as we will have for selling LED lights for the film market, for the cinema production market. Thirdly, we are focusing a lot also on more taking care of the large content creation studios, mainly for e-com that are producing both still photographs as well as video footage for -- mainly for selling products on the internet, that is different kinds of e-com studios.
Here, we are approaching the customers more directly, and hence, we are also all the time developing our workflow solutions to adding on new functionalities and new kind of solutions to solve the critical problems or critical issues in the e-com, large volume content creation studios. So, we're doing all of this of different kinds, and focusing now more on launching products than we did before.
And can we talk about the competitive landscape? Do you have more fierce competitors right now or is it less demanding? What is happening with the challengers?
[ No ], I would say that the landscape is very similar to -- as it always have been. I can see somewhat more tougher in the LED area light for -- lower end light for film production, especially from Chinese manufacturers. So, it is somewhat -- and you should also bear in mind that this area is new to us. We don't know the customer as well, even if we already know quite a lot of these kind of customers in that area, and we are trying to take the position as the premium brand in lighting for film production.
And the final question regarding your establishment in L.A., in Los Angeles, how is this going?
Sara, who's the manager there, she's been there since August. So, it is going great. We are -- and it is too early to judge, but we already now know that this is very important to us. We have a much -- we have our toes in the water, so we are there in the market. We talk to the customers, we do activities, and it is very good, but you can't see that really [ onto ] the figures.
Great. And I have not received any questions or e-mail either. So let us round off today's telco by reminding you of our new end of year report date, which is the 12th of February next year. Thank you for joining us this morning.
Thank you.