Profoto Interim Report Q3 2023

Financial summary July–September 2023

  • Net sales totaled SEK 172m (235), a decrease of 26.8 percent. Organic growth totaled -28.7 percent and the currency effect 1.9 percent.
  • EBIT totaled SEK 35m (66) and the EBIT margin totaled 20.2 percent (28.0).
  • Profit for the period totaled SEK 27m (54).
  • Return on operating capital totaled 56.5 percent (81.1).
  • Cash flow from operating activities amounted to SEK 29m (64).
  • Earnings per share (before and after dilution) totaled SEK 0.67 (1.34).

Financial summary January–September 2023

  • Net sales totaled SEK 583m (618), a decrease of 5.7 percent. Organic growth totaled -12.8 percent, the currency effect 4.3 percent, and the effect of acquisitions 2.9 percent.
  • EBIT totaled SEK 153m (169), and the EBIT margin, 26.3 percent (27.3).
  • Profit for the period totaled SEK 119m (130).
  • Cash flow from operating activities totaled SEK 147m (157).
  • Earnings per share (before and after dilution) totaled SEK 2.96 (3.24).

Financial summary October 2022–September 2023

  • Net sales totaled SEK 813m (836), a decrease of 2.7 percent. Organic growth totaled -12.9 percent, the currency effect 5.9 percent, and the effect of acquisitions 4.3 percent.
  • EBIT totaled SEK 234m (247), and the EBIT margin, 28.8 percent (29.6).
  • Profit for the period totaled SEK 183m (189).
  • Cash flow from operating activities totaled SEK 226m (258).
  • Earnings per share (before and after dilution) totaled SEK 4.58 (4.73).
Key ratios, Group Jul-Sep 2023 Jul-Sep 2022 Jan-Sep 2023 Jan-Sep 2022 Oct 2022-Sep 2023 Full year 2022
Net sales, SEKm 172 235 583 618 813 848
Net sales pro forma, SEKm 642 872
Organic growth, % -28.7 6.5 -12.8 5.1 -12.9 -0.8
EBITA, SEKm 48 80 195 205 290 299
EBITA margin, % 28.0 34.0 33.4 33.1 35.6 35.3
EBIT, SEKm 35 66 153 169 234 249
EBIT pro forma, SEKm 169 249
EBIT margin, % 20.2 28.0 26.3 27.3 28.8 29.3
EBIT margin pro forma, % 26.3 28.6
Adjusted EBIT, SEKm 35 66 153 17 7 234 257
Adjusted EBIT margin, % 20.2 28.0 26.3 28.6 28.8 30.3
Profit/loss for the period, SEKm 27 54 119 130 183 194
Cash flow from operating activities 29 64 147 157 226 236
Net debt, SEKm 88 65 88 65 88 4
Net debt/EBITDA LTM 0.28 0.21 0.28 0.21 0.28 0.01
Return on capital employed, % 47.9 59.1 47.9 59.1 47.9 52.5
Return on operating capital, % 56.5 81.1 56.5 81.1 56.5 84.1
Earnings per share, SEK 0.67 1.34 2.96 3.24 4.58 4.85

Investing in new products to drive demand

During the last 12 months, we have had a turnover of SEK 813m (836), a decrease of 3 percent compared to the previous 12 months. Growth in the third quarter was unfortunately lower than that and our sales compared to last year decreased by 27 percent to SEK 172m (235). The low sales level meant that our profitability at EBIT level decreased to 20 percent (28), which is below our target of 25-30 percent. On a positive note, we succeeded in improving our gross margin to 70 percent (69) during the quarter.

Cautious market and few product launches

Naturally, we face a tough market. Our customers primarily create visual content for the sale of consumer goods, and inflation, higher interest rates and geopolitical uncertainty affect the willingness to invest among both consumers and our customers. In the dialogue with our customers and retailers, it is clear that both professional photographers and e-com studios are cautious with their investments in these uncertain times.

My conviction is that our fate is in our own hands and my experience is that we always need to give our customers strong reasons to buy our products today, and not wait until tomorrow, to get business in uncertain times. Profoto’s success has always been based on our ability to introduce new, innovative products that meet our customers’ needs. For the past 20 years, we have had one or two major product launches per year, driving annual growth of over 10 percent in a market that has grown 3-5 percent.

Over the past year, we have unfortunately not succeeded in this. We have not had a major product introduction in five quarters, which means that sales from new products have decreased. Looking back over the past three years, I can conclude that our reduced rate of investment in product development during the pandemic has caused the ”hole” in our product launch pipeline that we are now seeing the consequences of.

High sales activity and continued investments in product development

To create demand in the medium term, our clear ambition is to get back to, and preferably exceed, our historical rate of one to two major product launches per year. We expect to reach that level already in the next 12-36 months. Anyone who has followed us since the listing in 2021 can see that, after the pandemic, we have continuously increased our investments in product development and I feel confident in our ability to translate these investments into new exciting products and solutions for our customers in the three areas that will drive our future growth: Light for professional photographers, workflow solutions for e-commerce and light for moving images.

We are a sales-driven company and to create demand in the shorter term, our global sales team, led by Patrik Bluhme, has worked hard to increase our level of activity in the market. This has led us to increase the number of profitable sales and marketing activities, which has already yielded results during this quarter.

Innovation for our customers

To get a better sense of what’s happening in the market and to confirm that we are putting our energy and resources into the right things, I have prioritized spending extra time with our customers. I’ve been traveling around and meeting some of our biggest retailers and studio customers in the world. It was also important for me to take the opportunity to work at our booth at a trade show in New York during the quarter. The fair was organized by our largest retailer and the number of participants was far beyond both their and our expectations. I therefore had a unique opportunity to spend two days with several hundred customers and other suppliers in the industry. In addition to a number of new insights about our customers that will be reflected in the new products we are developing, it is clear to me that our market is very active and that there is a lot of interest in creating visual content, and in doing so with our products.

I am therefore convinced that we are focusing on the right things to create more demand for our products: sales activities and product development. I also see that the whole organization at Profoto really focuses on sales and product development and that makes me very proud.

Even though it is difficult to predict when the macroeconomic conditions will improve, I feel very confident about the future as our customers are creating more and more visual content and our innovation is unique.

Sundbyberg, November 7, 2023

Anders Hedebark
President and CEO