Pierce; interim report January – June 2021

Stable second quarter, despite challenges

April – June 2021

  • Net revenue decreased by 5% to SEK 451 (472) million. In local currencies the decrease was 1%. Last year’s second quarter was clearly positively impacted by Covid-19 effects.
  • EBITDA totaled SEK 42 (53) million. Adjusted EBITDA was SEK 43 (54) million, equivalent to a margin of 9.5% (11.4%).
  • Operating profit (EBIT) was SEK 31 (43) million. Adjusted operating profit (EBIT) totaled SEK 32 (44) million and the adjusted operating margin was 7.0% (9.4%).
  • Cash flow for the period was SEK -407 (119) million, which was primarily explained by the repayment of previous financing.
  • Earnings per share before dilution was SEK 0.54 (0.47) and SEK 0.54 (0.47) after dilution.
  • Profit/loss for the period amounted to SEK 21 (16) million, positively impacted by a lower financial net, which was SEK -5 (-21) million, mainly related to the changed financing structure.

January – June 2021

  • Net revenue amounted to SEK 820 (780) million, equivalent to a growth of 5%. In local currencies, growth was 9%. The first half year of 2020 was positively impacted by Covid-19 related effects.
  • EBITDA totaled SEK 61 (62) million. Adjusted EBITDA was SEK 72 (64) million, equivalent to a margin of 8.8% (8.2%).
  • Operating profit (EBIT) was SEK 38 (45) million. Adjusted operating profit (EBIT) totaled SEK 50 (46) million and the adjusted operating margin was 6.1% (5.9%).
  • Cash flow for the period was SEK -62 (86) million, primarily comprised of proceeds from the new share issue executed in conjunction with the listing, less the repayment of previous financing.
  • Earnings per share before dilution was SEK 0.59 (0.07) and SEK 0.59 (0.07) after dilution.
  • Profit/loss for the period amounted to SEK 22 (2) million.
Apr-Jun Jan-Jun Jul 2020- Jan-Dec
SEKm (unless stated otherwise) 2021 2020 2021 2020 Jun 2021 2020
Net revenue 451 472 820 780 1,563 1,523
Growth (%) -5% 39% 5% 28% 10% 23%
Growth in local currencies (%) -1% 39% 9% 27% 15% 24%
Gross profit 209 216 385 354 741 711
Profit after variable costs 103 110 190 175 373 358
Overhead costs -60 -57 -118 -111 -228 -221
Adjusted EBITDA 43 54 72 64 145 137
Adjusted operating profit (EBIT) 32 44 50 46 101 97
Items affecting comparability -1 -1 -11 -2 -26 -17
EBITDA 42 53 61 62 119 121
Operating profit (EBIT) 31 43 38 45 75 81
Profit/loss for the period 21 16 22 2 19 -1
Gross margin (%) 46.3% 45.8% 47.0% 45.4% 47.4% 46.7%
Profit after variable costs (%) 22.8% 23.4% 23.2% 22.5% 23.9% 23.5%
Adjusted EBITDA (%) 9.5% 11.4% 8.8% 8.2% 9.3% 9.0%
Adjusted operating margin (EBIT) (%) 7.0% 9.4% 6.1% 5.9% 6.4% 6.4%
Cash flow for the period -407 119 -62 86 -167 -19

CEO’s comments

Stable second quarter, despite challenges

We are following our long-term plan to strengthen our leading position in the European online market for motorcycle equipment. During the second quarter, our KPI’s developed well, while net revenue in local currencies decreased by 1 percent, primarily due to a challenging comparative quarter. Last year’s second quarter was exceptionally strong, with a growth in net revenue of almost 40 percent, clearly driven by Covid-19 related effects. During the first half year 2021, our growth in local currencies was 9 percent. If we extend the perspective and compare Q2 in the current year with the equivalent quarter in 2019, average growth (CAGR) in local currencies reached 17 percent. Corresponding average growth during the first quarter was 19 percent. During June, growth in local currencies was positive.

The second quarter comprised several challenges. Higher global market prices for container shipping increased the cost of goods from March. We have also continued to experience stock availability shortages in both our private and external brands due to global supply chain disruptions. Moreover, the online customer behavior changed compared with Q2 last year. A lower degree of browsing for various options was replaced by a more targeted shopping pattern. This decreased the traffic but was almost fully compensated by an increased conversion rate.

In this challenging environment, we have focused, through increased campaigns, pricing, and marketing activities, together with supplier negotiations, on maintaining a good margin after variable costs. Sales of private brands grew by a couple of percent, which implies that their share of total sales increased and somewhat positively impacted the gross margin.

During the second quarter, adjusted EBIT amounted to SEK 32 million, equivalent to an adjusted EBIT margin of 7.0 percent. This was SEK 13 million lower than previous year. However, as previously explained, we estimate that EBIT during last year’s Q2 was positively impacted by pandemic effects exceeding SEK 15 million, primarily thanks to the extraordinarily high sales.

In the Offroad segment, net revenue decreased in the second quarter by approximately 3 percent in local currencies. For the first half year, growth was approximately 9 percent in local currencies, with a margin after variable costs which increased just over one percentage point compared with the first half year last year.

Within the segment Onroad, net revenue grew by about 2 percent in local currencies. In the first half year, growth was approximately 10 percent in local currencies, with a margin after variable costs which increased just over one percentage point compared with the first half of 2020. We have continued the work with strengthening the Onroad assortment. Amongst other things, we have signed agreements with Dainese and AGV, two leading global brands within motorcycle gear, and we now look forward to deliver an even stronger customer offering. We also launched “Course Vento”; this year’s collection of motorcycle jackets and gloves under our private brand Course.

In addition, net result developed positively as an effect of the refinancing we undertook in conjunction with the listing, as interest expenses decreased.

Positive KPI development

Our KPI’s developed well during the second quarter. Our online-community, where we engage daily with motocross, enduro and street riders all over Europe, has surpassed the 1.5 million followers mark – a true milestone!

Customer satisfaction, which we measure through Trustpilot and where, in June, we exceeded 100,000 customer reviews, was at 4.2/5. Amongst other things, we see a notable decrease in customer contacts compared with last year due to both a higher quality in the processes involved and since we offer several self-service solutions which are appreciated by the customers.

The number of active customers was 1,141,000, an increase of 13 percent compared with Q2 2020. The average order value (AOV) increased to SEK 944. Most notable is the increase within Onroad, thanks to a better assortment and less clearance activities.

Continued uncertainty in the near future

There is a large market of motorcycle riders all over Europe longing to get back on the tracks and roads again when the countries open up after the pandemic, and we continue to feel confident with the underlying growth in the online market, as well as the long-term trend. The pandemic’s impact on customer behavior, together with continued stock availability shortages and delivery disruptions, as well as increased shipping and raw materials prices, imply that the situation is difficult to navigate in the short-term.

As always, we must focus on what we can control, the customer offering and our scalability. These are two key factors in delivering profitable growth. We strive constantly to become the customer’s first choice through adjusting and sharpening the offering with the right assortment, price, and delivery terms. Our ongoing initiatives to improve our processes and systems has resulted in good improvements while there still is a great deal to be done. There is clear potential for us to further strengthen, over time, our economies of scale and customer experience.

We are now intensely planning for the upcoming campaign season starting with Black Friday in November. Given the uncertain situation with the supply chain, we are working with extra safety margin and plan to build up our inventory during the next couple of months to ensure that we have a strong customer offering well in advance of the campaign season.

Finally, I wish to thank all employees for all their hard work to date and look forward to meeting up again, face-to-face, when Europe opens after the pandemic.

Stockholm, 27 July 2021

Henrik Zadig
CEO, Pierce Group AB

For further information, please contact:

Henrik Zadig, CEO
Email: henrik.zadig@piercegroup.com
Tel: +46 73 146 1460

Tomas Ljunglöf, CFO
Email: tomas.ljunglof@piercegroup.com
Tel: +46 73 378 0154

About Pierce Group

Pierce is a leading and fast-growing e-commerce company selling gear, parts and accessories to riders across all of Europe via some forty websites adapted to local markets. Pierce has two major segments, Offroad – sales to motocross and enduro riders, and Onroad – sales to high road riders. Pierce also has a smaller segment, Other, which primarily focuses on sales to snowmobile riders. With a large and unique product assortment, including several private brands, an excellent customer experience and attractive prices, Pierce is changing the motorcycle enthusiast market in Europe. Headquarters are located in Stockholm, the central warehouse is in Szczecin in Poland, and, in addition, the major portion of our customer support services is located in Barcelona. The Company has approximately 450 employees.