MIPS - Year-end report 2017
October - December
• Net sales increased by 29% to MSEK 40.6 (31.5)
• Operating profit increased to MSEK 14.6 (13.8). Adjusted operating profit increased to MSEK 14.6 (13.7)
• Operating profit includes litigation costs of MSEK 4.1 (0.9) relating to the patent infringement lawsuits the company has filed
• Operating margin decreased to 36.0% (43.7) Adjusted operating margin decreased to 36.0% (43.5)
• Cash flow from operating activities decreased to MSEK 0.9 (9.8)
• Earnings per share diluted, amounted to SEK 0.45 (0.49)
January - December
• Net sales increased by 45% to MSEK 125.6 (86.6)
• Operating profit increased to MSEK 20.8 (18.4). Adjusted operating profit rose to MSEK 27.8 (24.2)
• Operating profit includes litigation costs of MSEK 16.5 (3.6) relating to the patent infringement lawsuits the company has filed
• Operating margin decreased to 16.6% (21.2). Adjusted operating margin decreased to 22.1% (28.0)
• Cash flow from operating activities amounted to MSEK 11.1 (16.0)
• Earnings per share diluted, amounted to SEK 0.64 (0.65)
• The Board of Directors propose no dividend pay-out for the year 2017
COMMENTS FROM THE CEO
Strong fourth quarter caps a very good year
During the fourth quarter, net sales increased by 29% to MSEK 40.6 (31.5). Adjusted for currency impact organic growth was 37%. For the full year net sales grew with 45% (44% in local currency). Our innovative MIPS BPS solutions and our strong partnership with leading helmet manufacturers have during the year driven growth with all our top 15 customers, in all our product categories and across all geographies.
Adjusted operating margin in the quarter was 36% (43), which includes legal costs of MSEK 4.1 (0.9) related to the company’s patent litigation. Our adjusted EBIT margin, excluding legal costs, was 46% (46) for the quarter and 35% (32) for the full year. It is satisfying to see that our profitability has developed well during the year.
During the fourth quarter, sales was partly affected by continued production disturbances at some of our main customers’ manufacturing facilities, which led to reduced demand of our MIPS BPS solutions as the helmet brands have not been able to produce the number of helmets the market required. Our customers have taken measures to manage the situation. However, it is too early to say when their production capacity is back at a satisfactory level.
Gaining traction in new categories
In November we participated in the world-leading motorcycle fair, EICMA. At this fair, two leading global brands launched road helmets equipped with MIPS BPS. We have previously been well represented in the motocross category and this is the first step to get the same traction in the road helmets category. Our customers’ helmet launches have been well received and will be important components of MIPS becoming established in this strategically important category. Customer interest has also increased as FIM (Fédération Internationale de Motocyclisme), an organization that develops a global certification method for MOTO GP helmets, now also includes test methods for measuring rotational movements in its certification, which is very positive for MIPS, as the technology leader in solutions to reduce the impact of rotational movement.
MIPS defends its patents
20 years of science and research is the basis of MIPS technology. With our leading technology it is clear we seek to defend our patents whenever we find it necessary. During the fourth quarter, we initiated a patent infringement process against POC Sweden AB, which we believe are infringing on one of the MIPS rotational movement protection patents.
Award-winning helmet model launches with MIPS BPS at world leading winter sports fairs
In January 2018, nine MIPS customers launched another 18 helmet models equipped with MIPS BPS, at two different fairs: Outdoor Retailer, which took place in Denver and ISPO in Munich. Two of the helmets with MIPS BPS won the prestigious ISPO Award. One of the helmets was in a completely new category for MIPS, rock climbing, with the world-leading brand Mammut. The other award was awarded to Sweet Protection, who won the ISPO Gold Award with their all-mountain ski helmet Switcher. This brings the total number of wins of this coveted award to eight helmets with MIPS technology at ISPO in recent years.
A broad customer base that creates the foundation for future growth
We look forward to an exciting year with a strong foundation of customers as the basis for growth. We have strengthened our foundation for growth. Looking at 2017 I am proud to summarize that we have delivered MIPS BPS solutions to 60 brands, with 15 brands added during the year. The number of MIPS BPS equipped helmet models our customers sold by the end of the year was 302, up 90 versus 2016. This has led to 2.3 million delivered MIPS BPS units during 2017, to be compared with 1.7 million in 2016. This growth was primarily driven by higher demand from existing customers, mainly in the Bicycle, Snow and Motorcycle categories.
Strategy and focus remain unchanged
In line with our strategy we remain focused on research and development and are increasing our market presence through targeted marketing communication. The focus for 2018 is to continue to drive growth with both existing and new customers across all categories. With 45% growth in 2017 and with strong plans for the coming years, I am confident that we will reach our long-term 2020 ambitions, with net sales exceeding MSEK 400 and an EBIT margin above 40%.
Johan Thiel
President and CEO