Swedish helmet technology provider Mips saw sales declines moderate quite a bit in the fourth quarter from the 32 percent decline posted in Q3 and a 51 percent decline experienced in the second quarter, as the company reported the bicycle helmet category was posting growth again; however, the potential upside in that category could not overcome the sharp decline in the motorcycle business as profits headed south and cashflows contracted considerably for the quarter and full year.

Mips saw fourth-quarter net sales decline 15 percent, or 13 percent currency-neutral (CN) terms, to SEK 91 million, compared to SEK 107 million in the corresponding quarter last year. The company reports in Swedish Krona (SEK).

Helmet Category | Sport
The company said it saw a buck in the trend in the fourth quarter compared with the last five quarters.

“Since autumn 2022 the bike sector has been dealing with something called the ‘bullwhip effect’ caused by an overly aggressive build-up of inventory during the rapid growth that took place during the pandemic, said company President and CEO Max Strandwitz. “The Bike sub-category is a very important sub-category for us, and during the fourth quarter we witnessed a growth in sales and saw positive developments at most of our major customers.”

Within the Snow sub-category, the market was said to be initially restrained, but it recovered towards the end of the year after a strong start to the winter season, mostly in the European market. However, Mips said in the short term the impact of the positive start to the season on sales is relatively small as there is not enough time for customers to get products to market before the current season ends.

“This means that growth prospects look good for the following season as inventory levels are now generally considered to be low,” Strandwitz said.

The CEO said that as previously stated, in their assessment, the Bike sub-category will see a positive development in 2024.

“This assessment remains unchanged,” he said in the latest report. “We believe that the majority of the growth in this sub-category in the coming years will be driven by our customers buying products from us to enable new production of helmets, in contrast to the last few quarters when they have sold helmets they already had in stock to their customers in retail.”

Helmet Category| Motorcycle
Growth continued to be weak in the Motorcycle category with a decrease in net sales of 66 percent for the fourth quarter. The decrease in net sales was said to be due to the soft market for the motorcycle sector, mainly caused by macroeconomic trends.

“This had an even larger impact on Mips as the overall weaker market growth coincided with higher inventory levels of existing helmets at a number of Mips’ most important customers,” Strandwitz emphasized in his letter to investors.

The high inventory levels of existing helmet models without Mips’ technology reportedly limit the company’s ability to launch new products together with their customers, which Strandwitz said is an important element of their future growth plans in this category.

“Even though the roll-out of these new models has taken longer than planned, during the spring we will collaborate with our partners to launch many of the new products that have been developed during the last year,” he suggested.

Helmet Category | Safety
Strandwitz said the company is happy with what it has achieved in the Safety category in 2023. The company said it sees a good inflow of new customers and higher volumes going forward.

“Our goal for the year has been to establish a broader customer base and grow the number of products equipped with Mips safety system,” Strandwitz explained. “We now have a total of 15 brands with which we have launched partnerships. We continue to see a robust increase in sales growth, even though the market roll-out of new helmet models has taken longer than estimated.”

Strandwitz said that during the important World of Concrete tradeshow in Las Vegas in January, “no less than six” new models equipped with Mips safety system were launched, which is a substantial addition to the existing portfolio of 15 models.

“Now that we have established a solid platform of many partners, our focus in 2024 will be on driving volumes, in other words ensuring that sell-through to end customers take off, and we look forward to an exciting year of growth,” he said.

“In line with our long-term strategy we have continued to invest in product development and brand-building initiatives this year,” added Strandwitz. “The costs associated with these activities, combined with what we deem to be a temporary decrease in our net sales as well as negative exchange rate effects, had a negative impact on profits in the fourth quarter.

Operating profit amounted to SEK 17 million, or 18.8 percent of sales, for Q4, compared to SEK 24 million, or 22 percent of sales, in the prior-year quarter. Diluted EPS amounted to SEK 0.60 per share in Q4, compared to SEK 0.71 per share in the 2022 fourth quarter.

Cash flow from operating activities amounted to SEK 31 million in the quarter, compared to SEK 47 million in the prior year quarter.

Full Year Results

  • Net sales decreased by 37 percent, and after adjustments for exchange rate effects the organic net sales decreased by 39 percent.
  • Operating profit decreased to SEK 70 million, or 19.7 percent of sales, compared to SEK 229 million, or 40.7 percent of net sales, in full-year 2022.
  • Diluted EPS amounted to SEK 2.42 per share, compared to SEK 6.63 in full-year 2022.
  • Cash flow from operating activities amounted to SEK 11 million, compared to SEK 236 million for the full year 2022.

Strandwitz said the company is still forward-leaning, despite challenging external conditions.

“Even though we have faced challenges during the last year, we are convinced in our long-term strategy,” he shared. “We see greater penetration of the Mips safety system and an increasingly positive view of our brand, both amongst our customers and in the channels where helmets equipped with Mips’ technology are sold. We are also seeing that our strategic investments in a wider product range for more categories is starting to gain traction.”

He said he is “naturally not satisfied” with the company’s financial performance in 2023, but believes they are doing there best in a tough market.

“It has been a difficult year with challenging external factors that we have done our utmost to counter,” Strandwitz said. “We have continued to advance our position and have strengthened our offering and Mips as a brand. This has been possible thanks to our sustained investment in our strategic initiatives. We are confident that we have the right strategy, which will continue to support our long-term plan and journey towards our financial targets.”

Image courtesy Mips