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Thule Group AB
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Ladies and gentlemen, welcome to the Thule Group interim report Q2 call. My name is Nadia, and I will be coordinating the call today. [Operator Instructions] I will now hand over to your host, Magnus Welander, CEO of Thule Group, to begin. So Magnus, please go ahead.
Thank you, Nadia. So good morning, everybody, and very welcome to a very positive second quarter result for the Thule Group. So I am very happy to report that our strong momentum continues. The very strong 3 quarters in a row we've had has now become a fourth very strong quarter with significant growth over the previous year. So our sales -- if we go to the first page, our sales for the first year was -- for the second quarter was SEK 3.229 billion, which was a 69% core foreign exchange adjusted constant currency growth. And we grew in both regions, so a faster growth in the second quarter in Europe with 74%, currency adjusted and 53% in Region Americas. If you take the first half year, the 2 regions have compared quite closely to each other as a total. Our gross margin continued to be very strong despite some challenges in terms of material costs. And we therefore also, with the strong and flexible back end of our business, had a very strong EBIT margin of 27.4% versus the 21% we had in the specific second quarter of 2020. That also means that on a rolling 12-month basis, we have an EBIT margin of 23.6%. Also, our cash flow was very strong in the quarter. And I think most importantly, what a lot of people are wondering now is how will we continue to perform. And I can say that despite the fantastic efforts of the supply chain team that truly pulled out some extraordinary work to be able to deliver the type of growth we've had, we haven't been able to fully meet the demand. There was even greater demand. That means that we overall believe there will be a strong, long season also in 2021, similar to what happened in 2020, and that more strong momentum will continue. We do have a lot of challenges, as all companies have, in terms of supply chain, in getting hold from our sub-suppliers of the right materials and components with the high growth we've had. But overall, we feel very strong about our quarter 3 as well. If we turn to the next page, we can look at quickly once again the growth in the quarter and the growth year-to-date. And very nice to see that we have year-to-date a constant currency growth of 63% and 100% on our EBIT level significantly boosting our EBIT profitability margin as well. So very happy with what the team has been able to achieve in the first half. If we go to the next slide, we can see a bit the comparative reality because we all know that we did face in quarter 2 this year an easier comp because quarter 2 in 2020 was exceptional. We had severe lockdown measures implemented in most of our major markets in April and the first half of May, so it's obvious that although June was very strong in 2020, we were facing a much weaker comp. Therefore, internally, we have focused a lot also in our comparisons on what we performed versus 2019, which was more of a normal year. And when we look in quarter 1, we had a 45% currency adjusted growth in '21 versus 2019. And in quarter 2, we had a 48% currency adjusted growth. When we then look forward, you can see that already in 2020, we were hitting those types of levels of growth, but I'm convinced that we will be able to grow in 2021 also versus the extremely strong comp of 2020 Q3. So a strong order book in the quarter leaves us positive to show growth also in quarter 3 despite the very challenging comp. And the same applies actually in our thinking as we see today for quarter 4. And the reason I say as we see today is obviously the one that there is still a pandemic going around in the world, and there are several reasons to be cautious on. There will be supply chain disruptions. To give you one example in Vietnam, where we have some of our bag suppliers, there is some serious lockdown measures being implemented as we speak until end of July. And it's also, of course, connected not just to various COVID lockdown potential issues, there is also the whole challenge of ensuring capacity at our sub-suppliers. Overall, though, with the strong work that our supply chain has been able to prove and the team's efforts, that makes me confident that we will show growth, although at maybe not the same type of pace as year-to-date because the comps are much more challenging. But we will show positive development also in the second half. If we go to Page 6, we can talk about the region, and we will start with the biggest region, Europe and rest of world. And here, truly it is a case of every category in every market performing well. We have very strong performance across the board. And we do know that we had a 12% currency adjusted decline in 2020 Q2 versus 2019 Q2 but still posting a 75% -- 74% growth in constant currency is, of course, very impressive. It's not just bike-related products, and I do want to point that out we have had a very strong performance in bike-related products. So our bike racks to bring your bike on the car, our bike trailers and child bike seats to bike with your children and bike bags and bike panniers bags. But it's not only that category. That category has been doing extremely well in the last 4 quarters and continues to do very well. But very nice to note is also the very strong growth rate in roof racks, roof boxes and roof top tents as a lot of consumers around in Europe has utilized these products when they wanted to go on that shorter weekend trip or those activities closer to their home to spend an active summer this year. What is also very positive to note is that despite challenges in their more complex supply chains and especially with the semiconductor situation, the motorhome manufacturers have been able to ramp up production very significantly. And U.S. investors that follow various companies in the sector have seen very positive views on both the performance to date, but also the order books that these companies have for the coming period. And we've been able to supply with that growth a very strong growth in our RV Products portfolio in the European market. Also happy to note that our stroller sales continue to grow at a very fast pace in the region. And here, it really has nothing to do with any COVID impact. Here, it's truly much more about us becoming a household name and becoming a serious player and starting to take space now in a true way with our 3 different models in the market, so feel very good about our stroller category rolling forward. And then we had an extremely weak comp in the bags sector in '20 -- in Q2. And in '21, we are showing growth. What is nice to see is that it's both in the sport and outdoor packs where we're having a very good momentum, but also in the more ordinary backpack that you would use and go back and forth biking or commuting to work with your laptop and your gym shoes maybe. So good performance also in that category after some difficult quarters. If you go to Page 7, we can see that also in Region Americas, actually all markets and all categories performed very well there as well. And we posted a 53% constant currency growth. Also here, we had a decline last year in the second quarter but still a very strong growth. And it is a very similar picture to the one I just presented in regards to Europe. The same things apply that across the board, the same categories are performing very well. We also see specifically in North America an even better pickup on our bag business. And the reason for that we see is that as everybody is aware that there was a quicker rollout initially of the vaccination programs in the North American markets, especially U.S. And as that happened, also travel picked up much faster. And with a greater share of travel totally in U.S. being domestic air travel, the rates of traveling has been much higher, and the rate of return to work has been higher. So those type of products that you -- bags that you bring for your traveling or for your daily work has been picking up very nicely in the region, also here comparing against weak comps, of course. So overall, when we look at it, I think we see a very strong performance across the board in the company on all aspects of our game in the material of all the products doing really well. So if we then look at what that has meant for the business, I will hand over to Jonas, who will talk a little bit more about the financial parts.
Thank you, Magnus. We are now on the slide called reported income statement. And as you heard, the strong development has continued and even strengthened further during the second quarter of 2021. The quarter is like the previous quarter, another record and, again, the highest sales in a single quarter since Thule Group was listed in 2014. The sales amounted to SEK 3.229 billion. This is an increase excluding FX effects of 69%. There are 2 factors to consider when looking at the quarter and comparing it to other quarters. And the first is the second quarter in any given year is the strongest quarter from a seasonality point of view for Thule with normally substantial differences between the strongest and the weakest quarter in the year. However, because of the strong demand that has picked up as of the second half of Q2 last year and with the demand that puts very high pressure on our delivery capacity, our strongest quarters are to some extent capped, and our weaker quarters are where we currently catch up and deliver on back orders. So the seasonal pattern has evened out somewhat. The second factor to bear in mind is that the second quarter last year, as Magnus mentioned, was heavily influenced by the pandemic. At least in its first half, as of mid-May last year, the demand picked up strongly as countries opened up after lockdowns. To meet the demand in June last year, however, we sold a lot from stock, and the second quarter last year was 12% down compared with a more normal Q2 in 2019. The gross margin in the quarter was 42.2% compared with 40.6% for the same quarter last year. The higher volumes have led to a higher absorption of production overhead costs. And this, in combination with a favorable product mix, explained the higher gross margin. We have seen an impact from increased material costs as well as from transportation costs, but these have in the quarter been offset by the high volumes. The EBIT margin in the quarter was 27.4% compared with 21.0% in Q2 last year. Here, we clearly see the fall-through of increased sales and gross profit to operating earnings. The increase in selling expenses is to a large extent driven by variable sales costs and launches online and direct-to-customer sales. Administration expenses in the quarter are approximately on the same level as last year. There is an item other operating income of SEK 50 million in the quarter, and this comes from the release of a provision that relates to the acquisition of the roof tent manufacturer Tepui. The financial net of minus SEK 6 million in the quarter is considerably lower than last year, and this is because of lower utilization of our credit facilities, where we last year decided to secure funding in the view of the great uncertainty that was caused by the outbreak of the pandemic. In addition, there are exchange rate differences compared to the same quarter last year that explained the difference. Tax cost year-to-date amounts to SEK 346 million, and the tax rate is on our guided level and the same as for the full year 2020. That is 23.6%. And if we move over to the next slide, the working capital and cash flow. Before going into the numbers for the current quarter, we need to remember that in Q2 last year, as I earlier said, we met the increase in demand both by increasing our production, but also by selling from stock. The level of inventory at the end of the second quarter last year was, as a consequence of that, low. And despite the higher level of stock at the end of Q2 this year, SEK 1.267 billion, our operating working capital as a percentage of sales has gone down from 24% to 19% at the end of Q2 this year. The operational cash flow of SEK 801 million in the period is considerably higher than for the same period last year when it was SEK 559 million. And the main driver behind the strong cash flow is the increased profit. It's also worth mentioning that despite us being on the current high production level, we are still somewhat on the low side when it comes to inventory. Capital expenditure in the quarter amounted to SEK 182 million, which is quite a bit higher than last year when it was SEK 37 million in the second quarter. And the investments relate to increased production capacity. Thank you, Magnus.
Thank you, Jonas, and then we can go to the final page before the Q&A about the focus for the coming second half of the year. And it is truly a very strong operational focus to meet the strong demand. You just heard Jonas finalizing the comment on there is a need for additional capacity expansion. You can, in general, say that we are anticipating programs we had in place to ramp up production output in all our major plants and working with a lot of our suppliers to do the same because we see this demand level as is sustainable going forward. So our main focus is to continue on the proven strategy that we have, which is organic growth driven. And we are now pushing for an expansion of all plants. We are continuing a very aggressive product development push. We have to say that as a percentage of sales, it is going down because we're not just throwing money at something without having a plan and with the significant top line growth as a percentage, therefore, the already ongoing and planned efforts means that our percentage of sales is going down a little bit lower than normal, but we are pushing very hard on the product development push. We're also opening our -- we will be opening our new global test center in the first quarter of 2022, and the building works are going on very nicely there. And as also Jonas mentioned, we do continue our push to support both our online retailers and our own direct-to-consumer with some significant investments and push in that channel. For the supply chain team that has done a tremendous job in the first 12 -- last 12 months in handling both the second half last year and the first 6 months this year, actually, their focus remains the same. We have a lot of daily stuff to do to ensure that we can handle all the various logistics and supplier bottlenecks that we do have. And at the same time, they're working hard on the bigger capacity ramp-up efforts in terms of investments and additional equipment for the midterm situation. Overall, as we know, raw material prices have been extremely high. And as I mentioned earlier on the call as well, that's something that we therefore decided that we needed to mitigate. We have implemented a price increase as of July with some partial effects depending on when orders were placed. And then there will be another price increase as of 1st of January, 2022 because we believe that, unfortunately, the higher cost levels, although may be not as extreme as some and the current place will be significantly higher than they were 12 months ago. If you look at therefore as a conclusion, overall, I am very confident that we will post a very strong second half of the year, that we will go into a very positive 2022. But on the shorter term, there is loads of uncertainties and specifics that means that we need to be as good as being on our toes as we've proven to be and that there will be some challenges in terms of costs to meet certain things, but we are doing our utmost to be able to meet the demand of our customers and consumers and thereby being prepared to sometimes have to sacrifice short-term cost effect to meet that. So overall, very happy with the results and very happy with where we stand going into the second half of the year. And with that, I leave it open for questions.
[Operator Instructions] Our first question comes from Daniel Schmidt from Danske Bank.
Yes. Magnus and Jonas, very impressive results this morning, so don't get me wrong here by asking the first question and listening to you guys through the pandemic and the numbers that you've been sort of delivering, of course, have been astonishing. But at the same time, sort of compared to the call earlier this year, I think that you were still quite hesitant on the development in the second half of this year. And now Magnus, you are -- and of course, I appreciate what you're saying on Q3 in terms of prolonged high season and price hikes. But what gives you confidence that demand will remain very elevated and grow in Q4 and also sort of looking into '22? What has changed?
Daniel, I think what has changed is clearly that as every month goes and you have lots of discussions with retailers that were very concerned last year and maybe the least convinced that the market would continue and we as a brand were much more convinced, as these retailers have now seen very good sell-through and are continuing to see good sell-through, they and many investors have carried out lots of studies and lots of communication with consumers. And it's clear that they have changed their mind also in a more positive sense. It's not just us saying it. I think if you listen to any of the outdoor brands like Yeti Outdoors or the North Face, Inside VF, they will be more positive now because there is a broader positive consensus from their outdoor retail partners as well. So there is -- well, we were one of the ones that were optimistic, but now there are more people that are seeing more strong signals of continued interest in those activities.
I know you've been seeing sort of a permanent change in behavior when it comes to biking maybe and the use of your bike. But at the same time, you're also seeing a recovery in bags. And does that make sense? Or is there a contradiction in that?
I think permanent is a very strong word to use any time. I think there is a long-term trend. To say that it's permanent is difficult, but I think there is a lot of realities that have happened in the bike-related sector which is huge infrastructural investments, a huge undercapacity in bike manufacturing with a lot of demand, a very, very strong e-biking trend enabling people to bike more without getting as sweaty or tired. All of those things have come to a light via the pandemic situation and has been extrapolated and augmented by it. I think that will continue. It doesn't mean that the growth rate as a percentage will be the same. It might, but it's not that the base will go down. That's the difference of view, right? So there is a bigger installed base, and that installed thing, it's also a bit of you see your friends biking more. There are better bike lanes. There is more biking. It will tempt more people to bike.
Yes. Yes. And do you think that you would have sort of had a different discussion with the Board if you've had these indications a couple of months ago when you laid out the new financial targets for 2030?
I think, as always, it's a valid question. I think you need to be careful of extrapolating things for too much. And as we've always said, we want to beat our targets. And if we beat them, we will change them in the future.
All right. Okay. And moving on then maybe, and if I get you right, you haven't had any additional price hikes during H1. You had it maybe at the end of last year, start of this year, and then you're having another one as of 3 weeks ago. And still during Q2, we're seeing the gross margin being up versus Q2 '19 and versus Q1 '21. Is there any chance that you've overcompensated on price in your latest price hike at the start of the year?
First of all, I actually don't like the word price hike because it sounds like we're doing something extreme. We do price increases, and we did one 1st of January, and we are doing one in the 1st of July this year, which is not our common approach. And it's all related to very, very obvious for all parties in terms of incoming material costs and incoming logistics and transport costs. What is the situation is that we have over a number of years done very smart investments in our supply chain, in our setup and have proven a very efficient and flexible back end of our business. We have now, since more than a year, one global ERP system. We have a very well-functioning back end of our business. And we have always said that, that would contribute to an EBIT margin pickup as if there was a top line growth. Now the top line growth has been exceptional. And with the exceptional top line growth, you get both production overhead absorption and very much so SG&A absorption if you have like we have a very scalable and efficient setup. Then on top of that, as we have mentioned, we have seen a positive product mix shift as well in this period, and that also moves the needle. The product mix shift we hope to happen is that, for example, with bags growing faster again, there will be a slightly negative product mix shift and average margin, et cetera. So now I absolutely cannot say that we've done too much. If anything, we've been quite cautious with our price increases because we are a long-term player. But there has been some very, very high price increases from some of our suppliers to us on materials, so we had to do it.
Yes. Now that was, of course, my reason for asking. But clearly, you've sort of more followed it, so that has actually sort of diluted the margin, if anything, given that you've made one to one increases. Is that what you're saying?
Yes. I think if you look at it, the big 2 -- definitely the 2 factors that was making us tick up is a combination of strong -- very strong economies of scale with the type of top line growth we've had and a positive -- very clear positive product mix shift. And then price increases is only to compensate material increases.
Yes. And would you say has there been an exceptional development of direct-to-consumer in the first half? Is that driving profitability a bit more than it has done historically? Is that part of the explanation to the gross -- to the EBIT margin?
I won't say exceptional. It's all according to a logical plan of, I think everybody realizes when you're starting to do something, your growth numbers will look great as a percentage, but they are from a tiny level in the beginning in Europe, for example. So the pace isn't that amazingly different. We haven't -- for example, as we've seen some challenges in supply, we haven't focused on our own D2C versus retail. We've been very fair, so to speak. We've been penalized ourselves as well because we see retail partners as a key going forward as well. So no, nothing exceptional, but of course, online sales in general is growing around the world. And direct-to-consumer is a preferred choice for many consumers from strong brands, so it is a very strong growth pace and will and is helping us from a channel margin perspective. And it did in Q2 but not in an exceptional way.
Okay. And this 23.6% that you've been delivering now for the past 12 months is, of course, quite above the level that you were last year. Is that a sustainable level? Or what's your best guess?
The only target we've set is about 20%. 23.6% is a long way above 20%. And it's clear we always have an ambition to maintain our high margins. There are already factors with the huge cost increases and only partial -- comping up partially only because, as you said, if we only take the cost and pass it on, it actually dilutes our margins. I would say, yes, there are some challenges, and it will also depend on the mix, but that we will sustain a very high margin, no doubt.
Yes. And then finally for me, you've alluded to sort of new category being launched and presented to your resellers during the autumn and then being sort of out in the market by the start of next year. Is this still the case? Or could you give us an update on when?
Yes. We will present a new category next year definitely in the market. How much of -- it won't be a full year sales because with everything going on and all the focus will have, we don't want to take too much risk on throwing something out and not being able to fulfill demand on a new category. But we will see it in the market in '22, and you will definitely hear more about it at our upcoming Capital Markets Day.
And that's before the year-end or...
We haven't set the date yet. I think it will mostly actually be related to because want to show our fantastic new facilities as well. And so it will be a lot reflected to simple facts like pandemic lockdown and travel possibilities. So we haven't chosen yet if it's Q4 or Q1 next year, but it's 1 of those 2 quarters.
Okay. Is it a little bit delayed because my impression was that you were sort of launching and telling your resellers during sort of the autumn, and now it looks like more the late part of the year?
Yes, we might be tactically doing a -- the actual -- the development project isn't delayed. But in how we communicate in the market, we might do it a bit later because there is so much focus on making sure the retailers don't feel that we're not focusing enough on the current business. The fact when a retailer is wanting to buy more from you and you struggle to keep up, they say don't think so much about the new. Give me what I already want, that we need to be balancing that.
Yes, absolutely. Okay. That's all from me.
Our next question comes from Gustav Hagéus from SEB.
My question is on sort of leverage. When I look at the incremental EBIT margin for the 2 final quarters of last year, so incremental EBIT or incremental sales, incremental EBIT margin was close to 50%. And doing the same exercise now in H1, it's closer to 35%. So that makes me wonder if there's a sort of scale of economics is fading off a little bit with these type of volumes, if you are closing up on some type of capacity constraint or how do you feel about that. Or is it other factors such as these increases in price and so forth that is -- or input cost that is the reason behind this?
You're absolutely right there, Gustav, in your analysis that as we have highlighted in both Q1 and especially now in Q2, we always try to have our plans being able to take additional capacity and have our suppliers being able to fulfill those capacity increases. But when we've seen the type of volume growth that we've seen, with a very challenged supply chain, with longer lead times than ever and more disruption than ever, we at times haven't been able to run those additional quantities as efficiently as we would have loved. And therefore, the pickup was easier, so to speak, to see it fall through in the first period or in the pandemic situation, so second half last year and it's until now. And that's also one of the reasons why we're CapEx is so heavy at the moment is that we are truly ramping up to have that additional capacity flexibility. We are not a company that are matching exactly the output level in our capacity. We want to have overcapacity because we want to be able to have very short delivery times and huge flexibility. Historically, we've had that, meant we could definitely get that pickup very nicely through our plants and our suppliers' plants. And now in some of the cases, we have truly -- we are running 24/7 now. And some of our products and lines, both us and our suppliers, are running 24/7 on some of them at the moment. When you're running 24/7, you can't get that much more out of it, so that's why we are additionally adding capacity. So you're right in your analysis.
And there's no problem by adding capacity. What you do to do that, can you just install more robots and you lift off what is more of a...
No, that's exactly what we're doing. So we -- it's a combination, as we mentioned already before, we have constructed some facilities in the past to always have the space to add lines. But also those type of products actually, unfortunately, have longer lead times than normal, and we're -- sometimes you're getting delayed. There are some of the things we wanted already in the spring that we're only getting deliveries on now ahead of the autumn, for example, because also those companies have struggled to keep up with the capacity. So we are combining. We have already created space that we're putting additional lines in, additional welding robots, additional laser cutters, additional thermoforming equipment, et cetera. But we are also actually extending facilities and building new space for additional things to come in '22 and '23 because we always want to stay ahead of the bump that might be coming up, by the way.
Then you do some sourcing, especially with Active with Kids, if I recall correctly. Could you update us a bit on what's your share of production now that is done internally in Poland and Sweden? How much is sourced?
So if you take all the 9 because it's not only Poland and Sweden, we have 2 big facilities in the U.S., one huge one in Belgium for our RV products and 2 smaller ones in Brazil and in U.K. for roof boxes and 1 big 1 for roof boxes in [indiscernible]. If you take all those 9 facilities, it's about -- slightly above the 80% actually due to product mix with bags going down. It's more than 80% of what we sell is assembled in our own plants. So that's still the case. Due to product mix having done extremely well in Sport&Cargo Carriers, several of the Active with Kids products also assembled in our own site. And all the RV Products means that it's more than 80%.
That's helpful. And when you look now past year of this exceptional margin, could you quantify roughly what has the temporary cost savings been or semi-temporary from less shares, less travel and incentive programs maybe? Do you have a number?
Actually, incentive programs, I can tell you, we have done well as a company financially, and therefore, people have achieved their bonuses, et cetera, to -- similar to expense as normal. So we didn't see any specific savings as some companies might have because we had a very strong performance and we met many targets. If you take fairs and events, it's a very small minor saving you're getting, and you are taking on an additional cost because you're organizing many more digital events. We've constructed studios to do our digital events and other things to do them really professionally. So there is, I would say, the only clear saving that is like-for-like true saving has been a lot less international travel. But we're talking about rounding errors in the totality for the total group. So I don't see any huge saving realization for the Thule Group because as we've mentioned, we've paid back what we got from [indiscernible] as support. And we had very limited furloughs in total last year anyway. So I would say we have a very true like-for-like logic picture of where we stand as a cost base going forward.
And finally from me, with the price increases, what do you think is a reasonable number to put in the model for price/mix for H2 year-over-year?
It's a relatively small number, first of all, because what we've done when you do a midyear increase that wasn't planned, we didn't take price increases on orders already placed, where we were struggling to meet and ship out, which means that the type of orders that I've mentioned that are now coming into Q3 will be with the previous pricing, right? So if you look at it, it would do a low single digit still, but it's definitely higher than the one that we normally have.
Okay. Great. Those are all my questions.
Our next question comes from Karri Rinta rom SHB.
Just 2 questions from me. Firstly, the difference in rate of growth in Europe and in the U.S., is this a reflection of some differences in exposure, i.e., that you have more RV in Europe and thereby probably benefited on both sales? Or is there any element of pandemic recovery being more advanced in the U.S. that might explain the high, but still somewhat lower growth than in Europe?
Yes. I think you have to look at the first half, and you see that they're very similar. If you take the first half as a total, and we did mention that already in the Q1, that the U.S. market especially placing very big orders. There are some major retailers in the U.S. that when they decide to place orders, which we've commented too also in the past, like the REIs of the world, they are very big. So when they decide to go hard and believe in something and commit to a category, they do place very big orders. And we have that effect, which we sometimes have that sometimes you end this spring -- or start the spring early, so to speak, in one of the regions. And that was what happened in the U.S., very strong March. If you then extrapolate it, we had instead very strong -- extremely strong April, May in that comparable thing in Europe. So if you look at it for the first half, they were actually quite similar.
All right. Fair enough. Helpful. Then secondly, a more broader question and related to new products and new product introductions. You were saying that now the only thing that retailers want is what they already have and what they want more of. But then next year, when we can assume that international travel will pick up, and then they maybe want something new so that they have something new to offer to their customers. So after this period of first having this pandemic lockdown restrictions, not fairs, and now you have to just focus on churning out the product already have, so how confident are you that by next year, you will have a fresh set of new products that you can roll out in your...
We're very confident. We have -- yes, we had some good new products this year as well. So when I mentioned the new, it's more about new categories because if you are a big retailer buying a lot of bike carriers and roof boxes and rook racks from Thule, even if you might think it's very nice that we come with something new, that you're going to first and foremost say you're the world leader in this. Make sure you can ship me all the quantities of the cool new products you just have launched in that category. So we have some very exciting new bike carriers this year that are doing phenomenally well, much better than we could ever have hoped. Timing was perfect. There will be some new bike carriers next year. There will be some new roof boxes, some cargo solutions and some baskets. So there will be lots of new products next year actually. It was more related to bringing a broad new category with what all that means. So I feel very good about our development team's efforts despite having had to work from home to a lot of degrees, we're going to bring some brilliant products next year as well.
[Operator Instructions] And we've had a follow-up question from Daniel Schmidt from Danske Bank.
Just a small follow-up, Magnus. And the sort of the result provision that you're doing on Tepui, the SEK 15 million, is that a consequence of Tepui not developing as you planned in terms of earn-outs and so on? What's the reason?
I think if you look at earn-out, Daniel, you know that you can do -- we always want to pay the right price to somebody. If somebody has a super, super, super optimistic plan in their mind when they pitch it to us, we say, okay, we only have 2 super in ours. We don't have 3. The category is doing fabulously well. It was a brilliant timing to go into rooftop tent, and we are growing incredibly well. But the seller had a very, very optimistic plan, so we had -- so we decided that, that was not going to be met, and then we can release it.
Okay. Because as you say, our impression is really that has been taking off strongly.
Phenomenal. Phenomenal. We've done incredibly well.
Okay. So he was riding high on other assumptions, I guess.
Every person selling a company, you want to get paid in too much as a seller, and you want to pay too little as a buyer. And at times, you can construct it in such a way that everybody feels happy that if that absurdly good thing happens, and then I'm happy to pay that extra, right? And that was one of these cases.
Yes. Can I just come back to the inventory? It's still up 34% versus Q2 last year. And of course, it's just sort of on that very day. And of course, it could differ a lot between the weeks and days. And you're saying that inventories were in the low side leaving Q2 this year. And of course, you've guided for demand or top line to be higher even though comps are very difficult. But that spread in the inventory year-over-year is still quite significant. Or is it not telling the true story?
You have to realize, as Jonas said, 2020 Q2 was absolutely wrong. We didn't want to have that low, but we had to take some steps in the spring. So you shouldn't compare anything with inventory levels in Q2 2020. It's a useless comparison. The reason why we're saying it's too low is that we are a company that historically have prided ourselves in next-day deliveries of every product and a fantastic delivery performance. To have that, you need to have inventory. You can't run your production on a daily planning basis, right? So you do have inventory to flush that through. At the moment, as I have to remind my own organization on the sales and marketing side, sometimes when they feel frustrated that we don't have everything in stock at any given minute, it is obviously the case that with huge demand despite producing more than ever, we never produced as much on any of our production lines -- product lines as we're doing at the moment. There are days when we don't have available what we would have liked to have available. And therefore, that's the situation that there is a lot of things on stock. It's just that the demand is so incredibly high that even so, there is not always that next-day delivery that we would love to have.
No. I hear you. I got you. And then just...
If I may -- if I may, Daniel, make some comments on that, if you calculate days inventory outstanding, it's like 30% lower now than it's been in the comparison period for previous years. So we are at DIO, it's pretty low.
That would make sense. Good. And then just a final -- as you guys might remember, you said in the start of the pandemic that you were pulling back on investments when it came to Packs, Bags & Luggage. And now of course, there's been a recovery in that segment, and it sounds like that will continue, are you redeploying sort of money into product development in that area in the second half? Or have you done so, so far this year?
We've already done so, and it's slightly directed differently maybe than we would have said 18 months ago because there is different patterns already coming out in traveling and what type of the things. Luckily for us, we feel that it's matching what we as a brand stand for well. There is a growth of the more rolling duffel bag, those types of small or smart packing solutions and things like that and a little bit less of the classical hard case and rolling it on marble floors at the airport. That trend, we believe, will continue as well, which is good for us because that's more close to our brand. So we are deploying some really nice efforts to some very nice collections that is coming early next year in that type and style of travel, and so I feel very confident in that. The whole global luggage market will still be in a very tough reality in '22. We've seen the first bankruptcies. There will be other things going on. There's a lot of discounted bags being sold and will be for a long while. So I'm not too overly optimistic on the traditional travel, but this combined practical bag that you can throw in, in the car or on the train and in the airplane, those type of things is seeing some good positions, and so we're positive about that.
Yes. And then maybe just a final one on M&A, and you guys are always said that a few and far in between. Has that changed?
No, there are a few, and we are close to those. We are constantly evaluating. And the smaller ones, there is more of them to evaluate. We've also [indiscernible] approach, and I always say that there are different approaches. You can win playing in many different ways. We are very clear on that. And M&A should happen, it should fit culturally, it should fit the brand, it should fit what it does because, otherwise, you're just buying lots of stuff. I think those things are more difficult to do in a professional way in terms of M&A when you're in lockdown measures and pandemics and you can't travel and visit. You can't do the cultural aspect. So I've read some of the CEOs saying you need to do that handshake over lunch or something. I'm one of those. So many of the sellers in our category, in the true outdoors category are also more like that, I would say. So I think that will pick up now as there is more open opportunities.
All right. Okay. That's all for me.
Thank you.
That was our final question, so I hand the call back over to Magnus for any closing remarks.
Thank you very much. So I want to thank you all for taking the time in this beautiful summer day and listening to a fantastic second quarter. We have a good confidence for the second half of the year, so we look forward of picking up after Q3. And in the meantime, I urge you all to go out, enjoy that great outdoors and use lots of our products.
Thanks, guys.