Earnings call transcript: Thule Group AB sees 16% sales growth in Q2 2025

Thule Group AB reported a robust second quarter for 2025, with sales reaching SEK 3,400 million, marking a 16% increase year-over-year. Despite a challenging market environment, particularly in North America, the company managed to achieve organic growth of 1.5%. The stock responded positively, rising 4.05% to SEK 282.4, reflecting investor optimism about the company's performance and strategic initiatives. According to InvestingPro data, analysts forecast EPS of $1.19 for FY2025, suggesting continued profitability. The company's strong Altman Z-Score of 8.21 indicates minimal financial distress risk, supporting its growth initiatives.

Executive Commentary

CEO Matthijs van Kempenberg highlighted Thule's strong market leadership and innovation capabilities. "We are global market leaders in the most important product categories," he stated, emphasizing the company's commitment to growth and investment in new product lines. Van Kempenberg also noted, "We continue to see our DTC business in The U.S. growing and clearly outperforming the total."

Risks and Challenges

• Economic Uncertainty: Tariffs and economic conditions may impact consumer purchasing decisions.
• Market Conditions: Weakness in the North American market remains a concern.
• Supply Chain: Ongoing efforts to optimize logistics and reduce external warehouses are critical.
• Competition: Maintaining leadership in a competitive market requires continuous innovation.
• Inventory Management: Achieving inventory reduction targets is essential for financial efficiency.

Q&A

During the earnings call, analysts inquired about Thule's strategy in North America, particularly regarding the improvement from -13% in Q1 to -3% in Q2. The company also addressed questions about the impact of recent price increases and the strong growth of the Quadlock performance mount business, which saw a 15% increase in Q2.

Full transcript - Thule Group AB (THULE) Q2 2025:

Carly, Call Coordinator: morning all and thank you for joining us for the Thor Group Interim Report Q2. My name is Carly, and I'll be the coordinator for today's call. And that time, over to the President and CEO, Matthijs van Kempenberg. The floor is yours.

Matthijs van Kempenberg, President and CEO, Thule Group: Thank you very much. Welcome, everybody, to today's call. I'm also, as usual, joined by Toby Lawton, our CFO. We will talk to the presentation, and it is later on available on our IR website as always. So starting off with the summary on page two.

This quarter is a quarter where we're growing, even though the market is still tough, growing a bit more than in Q1, and total sales in reported currency amounted to SEK 3,400,000,000.0. That's 16% more than last year, excluding the currency effects. We continue to see a weak market, both on the retail and the consumer side, and particularly so in North America. On a positive note, it's not getting worse, but it is still tough, and we'll get back to that. Organic growth was a small plus, 1.5% the quarter.

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Europe is up 4% and North America is down 3%, which we are, of course, not happy about, but it's a big improvement versus the development in the first quarter, which we'll speak more about later. Quite significant currency effect in the quarter of almost 6% negative takes reported growth in Swedish kronor to 10%. And it's very clear in the quarter and also in the previous quarter that the growth is coming from new products and new product categories, including the acquired Quartlock performance mount business, which continues to do well. It is, I guess, fact, but it is the biggest quarter in terms of sales in Tula history and about SEK 100,000,000 bigger, I think, than the peak quarter during the pandemic. Gross margin increased close to two percentage points, driven by Quadlock, which has a financial profile with a higher gross margin and higher share of SG and A.

EBIT or adjusted EBIT margin was down two percentage points. It costs a bit more to drive growth in a tough market. And as we have said, going into the year and also in Q1, have more product launches ahead of this high season, that is in H1 this year compared to the last year. So the product development costs are higher in the first half year compared to last year. So the operating profit or adjusted EBIT is in line with last year, excluding the restructuring costs for the actions we're taking in North America, the actions we announced in the last quarter.

Cash flow for operations was very good at almost 800,000,000. Just as a reminder, the working capital pattern that has been a bit different the last few years are now in line with historical seasonal pattern, and we have an inventory reduction target of continuing to reduce inventory on the back of the SEK 1,200,000,000.0 we've done last two years with another 200,000,000 this year, which is on track. A couple of highlights, we are very happy to have received further strong recognition for good product design. In March, we received seven IfDesign awards, and now in this quarter we have received 10 new Red Dot awards, which is of course a lot, big credits to our team. We've also won the ADAC car seat test, Europe's most important consumer test for car seats.

We won that during the autumn with our first product, and we won it again now during spring with our second product. And lastly, the changes we have made in North America are starting to pay off, we'll get back to in a little bit. Turning the page and zooming out, we see that the profitable growth trend is continuing. Thule has been a public company since 2014, and we have a good solid development of profitable growth throughout many years and continues also this year. You can also note that on a rolling 12 basis, net sales is now above SEK 10,000,000,000.

And again EBIT is a bit weighed by product development costs earlier in the year this year. Still the total amount is about last year. We're a product company and we report four product categories, And as usual, let's go through them all to give you some flavor of what's going on in the business. The headline across all is that the new TULER products and categories are the factors driving the growth also in this quarter. Starting with Sport and Cargo Carriers, which is our biggest product category for sure.

We've had a better Q2 than the Q1 with the net sales, which and when I say net sales here, we refer to organic growth of 3% in the quarter, takes the year to date number to plus one. Several good launches are really adding growth, so we've updated our best selling bike carrier Thule Easy Fold three in Q1, that's clear support for the growth. We've launched a few North America specific bike carriers, which are really doing well. We've had a June launch of our new lightweight, more mid priced compact bike carrier to outpace, which has started really well. And in general, we have several rear of car cargo products that are also adding really nice growth.

So several successful launches. Having said that, it is a tough market, particularly so in North America, continues to be weak as we've exited Q1, sort of Q2 continues. Consumers are cautious, but also on top of that, retailers are cautious to build inventory. So growth in total continues in sport and cargo carriers in Europe, almost there in North America in the quarter, but and a big improvement versus last quarter's trend. Second category, RV products.

We have the second quarter in a row now with growth despite the weak market, had 4% growth organic growth in the quarter, takes the year to date to three The industry is going through a weaker period, we have our sales pattern reflect that. We continue to decline in sales to the OE channel or the RV manufacturers, but that's offset by good growth in the aftermarket channel, that is to dealers. And we should also point out that also in the RV business, we have invested in new products, and it is very clear that the new products, which also received some nice design awards, are adding to the growth number in the quarter, now that the season is here. On Page five, we'll cover the remaining two product categories. And active with kids and dogs is a mixed picture.

In total, the category grew by 1%, which is a bit better than Q1, taking the year to date to minus two. We have two new product categories in this area, and they are all they are both, sorry, adding to growth for sure. The first is dog transportation, which was launched early last year, a really nice start last year, actually the best start of any new product category, continues very strong also this year with a premium dog crate Thule Alex and the dog trailer Thule Bexi, and we just launched the product that you see on the picture to the right, Thule Cappy, which is a crash tested dog harness for dogs now in June, which also had a very early of course, but a good start. So very pleased with the development in dog transportation products. And also car seats, child car seats for sure add value, of course boosted a bit by the ADAC test, which we're pleased about, and another new product coming also here in the second half of the year, so two good growth drivers there.

However, offsetting that is a decline in sort of bike related products in this active with kids and dog area. Very cautious retailers to take on inventory, and some of them also struggle financially, and we see that pattern from Q1 continues now in Q2. The highlight in this product family is that we continue to see very nice good sales momentum on tule.com, but on the retailer side it is more challenging. So total of those two different sort of aspects added that to plus 1%. Bags and mounts is also a mixed picture, where in total the category grows a lot, but that's because we include the acquired Quadlock business.

Organic net sales, which is the bags business, declined by 21%. So Quadlock, if we start there, is two thirds of this product category, bags and mounts now, continues to do really well, increased sales by more than 15% organically, continued to be fueled by good products and good market expansion, and we're very happy to see that the business continues to do really well. The bag side is the opposite side of well, a big decline, and a couple of clear reasons for why. First of all, we should just remind everybody that we have had a declining part of this category for a long time, which we refer to as legacy products that are being phased out over time. And then secondly, an important factor here is that North America represents a very large share of this category.

It's for many purposes, mainly North American business, where the market has been very weak, and a lot of this is sourced from Asia and Southeast Asia in our case, and retailers have particularly related to the tariffs also been very cautious to take on inventory in this category. Same positive note as with Active with Kids and Dogs that we do continue to see good growth of bags and luggage Tula branded products on tula.com. We reach our own consumers, and they are happy to receive our products, and we see sales growth there, but a very challenging retail environment in bags. So on the note of North America on page six, we have for sure been impacted by the weak North American market in Q1, particularly following the tariff announcements made, and we had a minus 13% organic sales development in Q1. And as you may remember, if you follow us, we talked a quarter ago that we made significant changes to North America.

We have a new dedicated North American sales organization in place that is now based in our regional head office in Connecticut, co located with one of the two factories that we have in The US. And we have closed a satellite office that came with an acquisition many years ago, which and that decision has now been accelerated, and Toby will cover that later, but it relates to the one off costs. So that new organization dedicated to North America on the sales and marketing side, we've also focused our growth investments on, we think, the most attractive pockets. We we are the market leader in bike carriers, but we have lots more to do there. And then we have a new focus on pickup trucks or renewed focus on pickup trucks.

And then thirdly, we have done price increases as of June 1 to offset the impact of the tariffs. And it's nice to see that in as we wrap up Q2 that the changes are paying off. It is still a weak market, although not getting worse, And we have clearly and clear improvement in the sales trend with minus 13% in Q1 now being minus 3%. Of course, we're not happy until it's a plus, but it's good to see that things are moving in the right direction. It's even better to note that the difference is really driven by the new strong performing North American bike carriers, which actually have been in a very high demand even if market is tough and we've been selling more than we can produce, which is a nice problem to have in this situation.

We continue, of course, with this work and the bike carrier work, but also the new truck bed rack tool escape, which we believe is a really strong product, very robust and easy and quick to both install and adjust. We launched here towards the winter at the end of Q4. And also note that both these products are also produced in The US, as could be noteworthy given the tariff discussions. We're really proud of the team and of the whole Thule organization that we've also been winning further recognition for our product development and design. So page seven, just outlining we won the ADAC, the Europe's most recognized car seat consumer test again, and it's a product called Tule Elm, rearward facing for children, small children between six months and four years old, that won the test now in May.

Digging into the details and the test results, it's particularly, I would say, we're particularly happy to see that we are recognized as the number one brand to eliminate misuse, which was a key part of our car seat launch, that a lot of car seats are safe, but of course we could take it to level in terms of both safety and convenience, but we also know that a lot of car seats are not installed correctly, and we wanted to deliver a product where it's easy to do, a good installation that is safe, and we get good results from that design, so that's really nice to see, winning with the first product and with the second product. We've also been awarded more design awards. We had seven IF design awards received in March, and now we have received 10 design awards from Red Dot, which is the second of the two big international design award organizations. Very pleased to see that. We can call out that we have or note that we, this year, have been receiving awards also for North American specific bike carriers, but also for, in this list, two RV products to the Villa Swing and to the Villa Track that also help our performance within the RV business, of course.

Turning to page nine, we are of course focused on growth for the short and the long term, but another one of our key priorities is to drive further efficiency within our supply chain. You may remember, we have been very focused on inventory levels and taking SEK1.2 billion out the last two years. And we are now taking the next step to extend and automate our warehouse facility in Poland, in Huta in Poland. It is fully automated, or it will be a fully automated warehouse with triple the pallet capacity of today, and that means we can eliminate costs for two external warehouses, and actually also reduce inventory levels. We reduce double handling, and we can optimize logistics better, and of course also lower personnel costs.

And we expect this project to be, or this new warehouse to be up and running by 2027. And I will leave the word to Toby to go through some of the more investment details of the project.

Toby Lawton, CFO, Thule Group: Thank you Matthias and good morning everybody. Just to give a few of the financials on the Huta project, we expect a CapEx of approximately SEK450 million and that will be phased over the next three years as you see below 30% in '25, 60% in '26 and ten percent in 2027. The cash savings from the project are approximately SEK100 million per year which we expect to have full effect first from 2028, but there will also be a one time positive effect on inventory of approximately SEK80 million and that will come successively during the first year of operation of the new facility. Then we expect some depreciation of course annual depreciation of approximately SEK25 million which then results in an EBIT impact of SEK75 million per year, again with full effect first from 2028. And just to mention this is an important project for us but it's part of the Tula investment programme that we have going on, the normal investment programme and we expect that to remain at approximately 2.5% to 3% of revenue over time.

We expect to remain at that level excluding leasing CapEx. All right, so with that I can flick on to the next slide, slide 10. And there's a lot of numbers here, but if I just to orientate the left hand side here you see is a recap of 2024. In the middle you see 2025 by quarter and on the right hand side you see a year to date comparison of the figures for 2025 and 2024. And if I start with the revenue growth, we, as Matthias has mentioned, we do have revenue growth obviously this quarter in a challenging market, but revenue growth in total is 10% from £3,100,000,000 last year to £3,400,000,000 this year.

That's a 10% reported revenue growth. We have organic growth of 1.5%. Then Quadlock contributes with over 14% and then we have a negative impact this quarter from FX, which Matthias has mentioned, which is obviously due to the stronger Swedish crown, which we see this quarter. The growth is driven by new products and categories, as Matthias has mentioned, and also to mention here again that the last 12 revenue has increased and is now GBP 10,100,000,000.0 when you take the last four quarters together. When it comes to the gross margin, we had a Q2 gross margin of 46.3%.

This is approximately two percentage points up versus last year which was 44. Four. So two percentage points up approximately or one. One. Nine percentages up.

Versus last year. It's also one. 5% better than the first quarter gross margin. And just to mention here that the biggest factor versus last year is Quadlock, but versus the first quarter, we are returning to the normal pattern where we still have the highest gross margin in our biggest quarter, which is the second quarter, but we expect to see a more even gross margin across the year, across the four quarters. If I come down to the cost side selling expenses have been impacted mainly by the acquisition of Quadlock and here it's important to remember that while Quadlock has a positive impact on gross margin because it has a higher gross margin, it also has a higher level of selling expenses.

So it impacts it does impact the selling expenses and the other factor in selling expenses is the earlier phasing of the product launches this year ahead of the high season. Then we also have administration expenses where we also have some impact from the acquisition of Cordlock of course. Coming down to the adjusted EBIT number we had an adjusted EBIT of £734,000,000 this quarter and that is adjusted to remove the impact from the one off impact from restructuring costs in North America which were SEK31 million taken this quarter and they relate to yeah the closure of our site in Longmont, Colorado. So if you look at the adjusted EBIT margin then the adjusted EBIT margin is 21.6% in quarter two. We had 23.6% in quarter two last year So this is lower than the adjusted EBIT margin last year.

And the main impact here is from the development cost related to the phasing of product launches, which we mentioned earlier. So that's the main impact on EBIT margin, but it's important to remember it's the same new products which we're launching which are also driving the top line growth. So they come hand in hand. Then further down the P and L we have an interest expense in quarter two of million. We have a tax charge of just over SEK150 million which is an effective tax rate of 23% and then yeah net profit in the quarter SEK512 million.

Good and if I move to the next slide, slide 11. Here we have the cash flow in the same format so I won't repeat that. And you can see cash flow from operations in the second quarter was SEK744 million. Working capital contributed here with SEK156 million, which is part of our seasonal pattern, which Matthias mentioned earlier that we build up working capital some quarters and we release some working capital in quarter two, but it's a swing between different lines within working capital. So this quarter we had a good reduction in inventories of three zero three million, which is normal for us due to the seasonality because this is the high sales quarter, so we sell down inventory.

And we're still very much on track towards our annual target for the full year to reduce inventory by SEK200 million. Receivables goes the other way however, we increase receivables because it's the high sales quarter again it's the same effect and we increased receivables by SEK282 million in the quarter but overall working capital reduced by SEK156 million. Then we had a CapEx in the quarter of SEK58 million. Year to date we are on SEK98 million for the first half year. That level is expected to be a bit higher in the second year as we start to have some of the Hooter CapEx in H2, but still within our expected investment programme.

And then we had a dividend payment also in the quarter of £448,000,000 So all in all, means we had a if I move to the next slide, slide 12, we're very focused on our cash flow, we're very focused on managing our leverage and the net debt came down slightly, but net debt and leverage are basically on a similar level than they were in Q1. Going forward, think it's important to be aware we do expect this to come down in Q3 both net debt and leverage ratio net debt to EBITDA and that's due to the fact that also due to the seasonal patterns but that we have a strong cash flow in quarter three and we have also have no dividend payment in quarter three so that means that we expect to reduce our net debt and our leverage in quarter three. Okay and with that I hand back to Matthias.

Matthijs van Kempenberg, President and CEO, Thule Group: Thank you, Toby. Turning to a few forward looking comments to wrap up the presentation part, going on page 13. As far as focus, we continue to drive the long term growth strategy we have in place, and we're doing that in a tough market. Having said that, we are, we think, quite well positioned in a tough market. Yes, North America is tough.

Yes, consumers and retailers are cautious across the world, and we do expect that to continue for the coming period. But we are global market leaders in the most important product categories. We sell premium products to consumers that are enthusiasts and have the ability to pay for news and innovations. I think we have proven over time again and again that we are world leading when it comes to developing new products and have innovation capabilities. We have a manufacturing footprint both in Europe and The USA, and we have financially strong that we can do long term investments.

And we're also well positioned in the aspect that we can impact quite a lot of our own destiny. We know that investments in product innovation pays off both in the short and long term, Q2 is very good example of that. We also have opportunities to increase our efficiency and take out costs, and the extension and automation of the warehouse in Poland is a very good example of that. So things we can do within our own control. The four priorities that we continue to drive are product development, where we have a really high pace this year, more front loaded compact next year and increased focus on the attractive pockets we have identified in North America that are making a difference.

We are scaling up new product categories, both the ones we've launched organically, dog transportation and child car seats, and the acquired performance phone lounge business. We're working on being more visible to the consumer, and we can see how the DTC channel continues to outperform all other channels in the quarter again. And on the theme of supply chain efficiency, we are working on continuing to lower inventory level to free up cash and also, as mentioned earlier, now an automation project of the Polish warehouse. So clear priorities with a few new action points, but the four main priorities continue. We are in the middle of the high season.

It is a very big product launch year. Compared to last year, we're more front loaded, and the high launch pace continues now in 2025. We have three themes this year. We're upgrading several of our best sellers. We are innovating or launching innovations in our core sport and cargo carrier category, the few launched in a few to come, and we're also scaling up our newest product categories.

And let me just wrap up by showing you a few examples of what's coming very soon. On page 15, we have a short view of Tulipalm, which is the newest addition coming in a couple of months and adding to the car seat category. It's a high back booster seat for the bigger children, which of course is safe and well designed, and has received positive reception so far from the retailer environment. So really looking forward to see that coming to consumers' hands. We are soon in this quarter in Q3 building out our leading duffel bag collection to Le Chasm, with more types of products and new colors, and also more accessories, and that's been a growth driver for us and look forward to see more of that.

And then with a change of mood from summer to winter, hope everybody gets a good summer vacation first, but when it comes to booking that ski vacation, keep Thule Arkos XL in mind with a good cargo solution behind the car, which is now wider and extended and would enable most people to transport their skis also behind the car for easier access and more convenience. So just example of a few products that are to come during the second half year of 2025. That concludes the presentation part. We'll get back to summer mode, and we'll get back to the operator to manage questions.

Carly, Call Coordinator: Thank you very much. Our first question comes from Daniel Schmidt of Stansbank. Daniel, your line is now open.

Daniel Schmidt, Analyst, Stansbank: Good morning. Matthias and Tov, I hope you can hear me. Just a couple of questions, maybe starting with The U. S, which of course has been in focus for a number of reasons. Could you say anything starting with the reception of the price increases that you conduct by the June 1?

I know it's quite difficult to sort of to really figure out what was pre buy effects and so on and May maybe and what's going to happen and what happened in June and what do you see now six weeks off to the price increases? And maybe tie that together with sort of your belief of the underlying demand pattern in The U. S. That you've experienced so far in the past couple of months?

Matthijs van Kempenberg, President and CEO, Thule Group: Hi, Daniel. Hear you loud and clear. Matthias here, I can start. Yes, we and just a reminder for everybody, we increased prices in North America with about 10% as of June 1 to offset the impacts from tariffs and secondary effects, I would say, of a lot of other things. Now, I mean, you're right in the sort of in the directions you call out, Daniel.

There was a bit of pre we announced this quite well ahead of time to our retail partners, so there was a bit of pre buy in May to get the lower prices obviously, and then a little bit softer June, but not too dramatic, I would say, in either direction. I personally believe that a lot of retailers are focused on inventory levels right now, and it's not really worth it, sort of, or worth the risk for many to take in a lot of inventory ahead of time, and then we operate, as you know, a very retail like supply chain model, so we can also deliver with a very short notice in June. But there's a bit of pre buy that helped May and sort of hurt June, and I guess it's a little early to see where that would happen in July, but no drama, I would say. The other point I think that's worth calling out related to this topic is that we've seen pretty much, I would say, every single player we keep an eye on also increased prices around this timing. Some a bit earlier than us, some in June and some June and some now in Buder sort of follow-up price increases also in July.

So I think the entire market is moving up in price in most of the categories that we are in. Volumes hurt, of course, when the prices go up quite a bit, but the sales price helps, just pure mathematics. I think the underlying demand is tough and weak. I mean, there was a bit of a sort of full stop experience there among the tariffs during Q1, and then you sort of left Q1 with a lower market, but stable, and that sort of continued, I'd say, look, throughout the second quarter, and that continues in Q3 as well. News is really what's working.

So I guess that's a couple of observations around your question, Daniel, and feel free to add follow-up questions if there's something to drill more into.

Daniel Schmidt, Analyst, Stansbank: Yes, there's a lot of moving parts, of course. And would you say that the exit rate is better than the entry rate in The U. S. For your sake in the quarter?

Matthijs van Kempenberg, President and CEO, Thule Group: I'd say it's about the same. I mean, thing that really moved the needle for us in Q2, I mean, we had a minus 13% organic in North America in Q1 and minus 3% in Q2. But the thing that's moved the needle for us is the new product and the new North American bike carrier specifically, and where we have really good reception. So it's more tied to I mean, our performance is more tied to the launches of that, and, you know, the big retailers getting the bigger orders out to all the stores, of that. So I don't think actually I could call out a big difference in underlying trends throughout the quarter except our own actions, which are the most significant parts.

Daniel Schmidt, Analyst, Stansbank: Actually also speaking And about growth, you actually managed to grow RV again as you did in Q1, even more so in Q2 despite the OE market being down quite a lot still in Q2. And at the same time, was really in Q3 last year, you started to see the big drop in OE and you also have one of the biggest players being out a couple of weeks ago saying that they will increase production because they think dealer inventories are now in balance. Should we start to see the OE side of RV performing better for you guys now as we get into Q3 with easier comps and these comments in mind?

Toby Lawton, CFO, Thule Group: Daniel. Good morning. Toby here. But I comment on that one. But we have seen in Q1 and Q2 the OE market is down a lot, and we've been down a lot in that sector as well.

We've just been compensated by a really good performance in the aftermarket. And we do see generally when it comes to consumer side that the sales are decent. It's pretty stable versus prior years. So consumers are still interested in buying RVs from the dealers, inventory is coming down, as you say. But I mean, it seems to be a very mixed picture across different manufacturers.

And I would say, in general, we've seen I think the trend is that in Q3, which is also the kind of where they take vacation stops, but there's going to be more reductions in production capacity than expected in Q3. So we expect Q3 to be impacted than we had previously expected. It's gone on a bit longer, this effect. And it remains to be seen sort of if anything carries how much it carries on after Q3. But I think it's getting better for some manufacturers, but it's not getting better for others.

So it's still going to be tough for another quarter at least.

Daniel Schmidt, Analyst, Stansbank: I guess sort of the German manufacturers are going to be more impacted than you maybe earlier expected then. If I read between the lines. But again, you do have a lower base to compare with on the OE side, at least.

Toby Lawton, CFO, Thule Group: Yes. Mean, did start during Q3 last year. So that's

Daniel Schmidt, Analyst, Stansbank: As it dropped quite a lot in Q3. Yes.

Toby Lawton, CFO, Thule Group: Yes, yes, exactly. Exactly. That's And

Daniel Schmidt, Analyst, Stansbank: just maybe then moving on to cost and margins before I leave the floor. You did, of course, reiterate that you were quite front loaded on PD spending. You did provide some information in Q1 saying that that was the difference versus the margin last year. Is that true for Q2 as well and you stick to your guidance that you will and should be around 7% of sales for the full year?

Toby Lawton, CFO, Thule Group: Yes. I mean, I think you answered the question yourself more or less, Daniel. But yes, I mean, the biggest factor in I mean, the margin dropped versus prior year. And if you take adjusted EBIT margin, we are 21.6% this year. We were 23.6 last year.

So the margin is lower this quarter versus last year. And the biggest factor there is the phasing of development spend towards the first half year. And we do expect development expense for the full year to be approximately 7%. Yes.

Daniel Schmidt, Analyst, Stansbank: Right. And good. And just finally on the gross margin, which did pick up quite a bit, and you're right, that's basically due to quad lock. Is there anything else that you want to mention that had an impact? Because we did talk about freight cost and raw materials in the previous quarters.

Are they now basically unchanged on a year over year basis or what's your view?

Toby Lawton, CFO, Thule Group: Yes, I mean, you're correct. So the biggest the impact for that increased the gross margin versus prior year is the quad lock impact. So that's true. And I think I've talked a bit about the pattern of gross margin through the year, where we expect it to be a bit more steady throughout the year, basically, that we had an uplift in Q1 this year versus last year due to the factors you mentioned, product mix and price. But here in Q2, it's more level.

We have a 1.5% increase between Q1 and Q2, which is more in line with the normal pattern of gross margin. So year to date, we do have a small improvement, but it's yes, but basically underlying gross margins are kind of pretty much flat with last year.

Daniel Schmidt, Analyst, Stansbank: Yes, okay. And just finally maybe on those investments made in Poland with SEK 75,000,000 in savings on EBIT of SEK 28,000,000. Is that going to be back end loaded? Or is there any impact on 26,000,000 and 27,000,000 in terms of savings?

Toby Lawton, CFO, Thule Group: Yes. There will be we expect it to start up in 2027. So we expect some effect in 2027, but the first full year effect will be 2028.

Daniel Schmidt, Analyst, Stansbank: Okay. Thank you. Thank you so much. Yes.

Carly, Call Coordinator: Thank you very much. Our next question comes from Fredrik Arverson of ABG. Fredrik, your line is now open.

Fredrik Arverson, Analyst, ABG: Thank you. Good morning team. Can I come back to Daniel's question on the EBIT margin, I guess down a couple of percentage points versus last year in the first half of the year if we exclude Cordlock? And I guess the key driver obviously is the product development costs. But if you were to call out any other drivers of the somewhat lower margin, which ones would that be, please?

Toby Lawton, CFO, Thule Group: The main driver is the product development cost, Frederic. So that's the main driver of that EBIT margin impact.

Matthijs van Kempenberg, President and CEO, Thule Group: Think, Fred, to add to it, think last in Q1, we said, I think the full gap will explain by product development phasing, and now it's the majority again in Q2. So and if we do exclude the QuadLock impact that you talked about, the clear big reason is the product development cost, I mean, full in Q1 and most in Q2 as well.

Fredrik Arverson, Analyst, ABG: And with the majority being more than two thirds or how should we Yes, read it's around

Matthijs van Kempenberg, President and CEO, Thule Group: there, I think, yes.

Fredrik Arverson, Analyst, ABG: Yes. Okay, good. Thanks. And you might have already answered this question, but the underlying gross margin sounds flattish year on year. Can you just confirm that again?

Sorry, I sort of missed the answer on that question before.

Toby Lawton, CFO, Thule Group: Yes. No. So in Q2, the underlying gross margin is flat. The impact is from the Quadlock acquisition in Q2.

Fredrik Arverson, Analyst, ABG: Okay,

: good.

Fredrik Arverson, Analyst, ABG: Was actually all my questions. So thank you and enjoy the summer.

Matthijs van Kempenberg, President and CEO, Thule Group: Thanks, Frederic.

Carly, Call Coordinator: Thank you very much. Our next question comes from Gustaf Hagis from SEB. Gustaf, your line is now open.

Gustaf Hagis, Analyst, SEB: Thank you. Good morning, guys. Thanks for taking my question. I have a question on OpEx, the OpEx build in the quarter. I appreciate your comments on R and D and phasing, but looking at FTEs, it builds a bit Quadlock.

I assume Quadlock has, say, 110 FTEs, but please correct me if that's not an accurate number. But assuming that 110 FTEs to QuadLock then, the underlying FTE base is up, say, 10% year over year. Inventory was down in the quarter, 1.5% organic growth. I assume no volume growth really. So curious to understand sort of the breakup here between perhaps if you could elaborate a bit on the breakup between Sweden and other geographies in terms of the FTE build?

And yes, that would help. Thanks.

Toby Lawton, CFO, Thule Group: I can so you're right. Quadlock is approximately 110, Gustav. I'd say the remaining part is really seasonal workers in factories, so it's not Sweden. We don't have much seasonal work in Sweden. It's largely in Poland and US where we have seasonal work.

And we have, you know, being strong in bike carriers, the products we obviously produce ourselves and which are quite intensive on seasonal work. We have seen we have a higher level of activity in our factories basically in Q2 than we had Q2 last year.

Gustaf Hagis, Analyst, SEB: Okay. Would you mind sharing the number of seasonal workers who used to do that, but I think you discontinued that in Q3 last year?

Toby Lawton, CFO, Thule Group: I think we don't separate out employees by different categories, Christophe, so the increase is driven by both cord lock and seasonal workers.

Gustaf Hagis, Analyst, SEB: Okay. And and the number of FTEs in Sweden now versus a year ago, is is that up or down or?

Toby Lawton, CFO, Thule Group: Yes. I don't have the figure to give you Gustav, but it's stable. I think there's no big change.

Gustaf Hagis, Analyst, SEB: Okay. Yes. Those were my questions. Thanks, Harry.

Matthijs van Kempenberg, President and CEO, Thule Group: Yes. Thanks.

Carly, Call Coordinator: Thank you very much. Our next question comes from Adelaide Daschen from Jefferies. Adelaide, your line is now open.

Adelaide Daschen, Analyst, Jefferies: Thank you and good morning, gentlemen. Just a few from me. Firstly, on this year's heavy product launch year. I guess, how should we view this going forward? Has 2025 and I guess also 2024 been more of like a hold forward of some product launches?

And should we expect next year to be a bit more moderated? Or do you see opportunities to continue to scale the new categories in ways where growth could continue to be supported by the new product launches next year?

Matthijs van Kempenberg, President and CEO, Thule Group: Hi, Della. Yes, happy to answer that question. So we work with long term product portfolio plans for all our categories, sort of three to five year outlooks, and it's been really intense in the launch calendar both in '24 and '25. Last year, mainly because we added two new product categories, and this year because we're doing more in our sort of core categories, if you like. We make decisions sort of every after summertime, early autumn about what to to launch for next year.

And when we, again, we have long term plans, but we do have some flexibility to pull some things forward or shift something is out, depending on what we find is attractive or not. So, that's an important exercise to be done during the third quarter. I think the thing I want to make sure I mention is that we have purposely and actively ran a pretty heavy product launch calendar this year, because we see that's what's resonating with the market and that's what's driving growth. Yes, it costs a bit more, particularly because we take a lot of our product development expenses as SG and A, right, including tooling costs and things like that, but it adds sales, gross margin, and it adds, of course, positive contribution, although maybe not in percent in the same quarter. And it over time makes us a stronger player with the partners and gives us a bigger footprint when the market returns.

So we'll make those decisions for next year during Q3, and we will update you before the year is over on our launch plans for next year, but it's active decisions that we are making.

Adelaide Daschen, Analyst, Jefferies: So if that's the case, I guess, would it be fair to say that last year around this time, you actively decided to push ahead with more product launches than you would have in 2025 in order to combat the weaker market environment?

Matthijs van Kempenberg, President and CEO, Thule Group: Yes. During Q3 last year, we had those conversations in our organization, and that's when we made exactly those decisions. Correct.

Adelaide Daschen, Analyst, Jefferies: Okay. Got it. Alright. If we stick to North America then, is there any way for you to be a bit more precise on the growth number here, the the negative organic growth? Like, how much did these new product launches support?

What was driven by the direct to consumer platform? Any type of I understand you can't be overly specific, but yes, any type of commentary here would be super helpful.

Matthijs van Kempenberg, President and CEO, Thule Group: Yes, sure. No, we'll add what we can. No problem. I think overall, again, sounded like a very tough market, clearly visible in some of the high tariff exposed categories like bags, for example, where retailers are super cautious, right? That's another color there.

I think two other comments maybe. We see that, you know, the consumers are, yes, cautious, but retailers are also very cautious on inventory build, and we continue to see our DTC business in The U. S, thotulo.com, growing and clearly outperforming the total, so I think that's a sign that it's not just consumers, it's also a bit of retail behavior, and I guess a bit credit to our DTC team as well. And I think a second color, which may be more important one I can throw in is, you know, the pretty much the full difference between doing a minus 13 in in q one organic sales in North America and a minus three in q two is related to new products and particularly new bike carriers for North America. And, you never really know before you launch, you believe you have some really strong products coming, but a couple of them were actually been selling more than we can produce and have to add shifts in our production capacity.

So the new products are really sort of what's helping the trend improve quarter on quarter, and of course also helping the total.

Adelaide Daschen, Analyst, Jefferies: Okay. That's actually good color. Thank you for that. And then just lastly, on the inventory target or the inventory reduction target that you've had for this year, are you still progressing as planned on that? No changes?

Toby Lawton, CFO, Thule Group: Adela, Toby here. Yes, absolutely. So we have the target of £200,000,000 That's on top of £1,200,000,000 that we released over the last two years as well. So we expect another £200,000,000 inventory reduction this year. Yes, we're working hard towards that and we're on track.

Adelaide Daschen, Analyst, Jefferies: Great, that's all for me. Thank you.

Carly, Call Coordinator: Thank you very much. Our next question comes from Karl Derenberg of DNB. Karl, can we just ask to check your line is not locally muted?

Karl Derenberg, Analyst, DNB: Thank you. Now maybe you can hear me better now. I just wanted to follow-up again on Quadlock and maybe specifically on The U. S, which is obviously quite an important market for that entity as well. And just if you could remind us a little bit on the pricing dynamics and so forth and maybe if you could share a little bit the development during the quarter as well.

I know you haven't been as pronounced on the pricing adjustments relative, let's say, old tool, but anything that has changed there in recent weeks on the back of the tariffs and so forth, given the DTC model and sourcing and so forth? Or has the quarter been fairly undramatic when we look at the, let's say, growth that you reported here in Q2 for Cordlock specifically in The U. S?

: Yes. Karl,

Matthijs van Kempenberg, President and CEO, Thule Group: think you're breaking up a little bit at the end, but I think I got your question. So I'll answer and then just follow-up if there's anything else. So on Quadlock, of course, Quadlock exposed to many of the same kind of macro factors that, yeah, I guess not just Thule, but many companies are. So, of course, it's a little bit of headwind in The U. S, still delivering good growth.

Price increases have been made also in the Quadlock business. It is a little bit of a different business model, as you know, because it's sort of lower ticket items, and it's very heavy on D2C, 75%, and can make much more frequent changes. So it's not as sort of in there, as you called, old Thule business, it was sort of more general price list as of June 1, whereas in Quadlock we make more continuous changes. It's also maybe worth to call out that gross margin is clearly higher in the QuadLock business as you know, so you can be more nuanced and optimizing pricing over time to carve it out. It doesn't really impact immediately the gross margin to the same extent.

So to summarize, yes, same market forces and yes, price increases in Quadlock executed in Q2 as well.

Karl Derenberg, Analyst, DNB: Yes, yes. Fair enough. And then coming back to the gross margin again, and apologies if this question was already asked, but has there been any headwinds in the gross margin here in Q2 or let's say, the year to date development on the back of the, let's say, underutilization? I guess you're having a little bit lower temps workers now as you are still reducing inventories? Or is that effect now fairly marginal as the big chunk was taken last year?

Is the effect very limited now?

Toby Lawton, CFO, Thule Group: I can try to answer this, but I mean I think I mean there are definitely headwinds. There's cost inflation when it comes to material costs, of course there's some salary increases which we're offsetting and we're driving efficiency gains to offset as much of that as possible. But we're not offsetting it completely on the cost side. Do have to offset some through price increases, which we've done as well. There definitely are cost headwinds.

I would throw into that, you mentioned a bit the kind of seasonality. We're producing a lot of the bike carriers ourselves. In The US in particular, we've been running out of capacity. So we've been trying to increase capacity a lot. And there we've put a lot more focus and more people into the factory to try and drive up the production levels and increase capacity quickly to meet the demand.

So there's a kind of combination of many effects, but underlying it's flat versus last year.

Karl Derenberg, Analyst, DNB: Yes. Then just finally, little bit more of a technical question, just on the adjustment that you're taking here in Q2 of roughly SEK 30,000,000, is that on the long bond facility, is that the total that is planned to be taken? Or is there any further one offs here expected in Q3, Q4? No, that's the total.

Toby Lawton, CFO, Thule Group: So it's expected to cost 31,000,000

Carly, Call Coordinator: Our next question comes from Agnieszka Viella from Nordea. I

Agnieszka Viella, Analyst, Nordea: have three questions. Maybe coming back to The U. S. And your comment that you've seen quite good demand for your bike products and that you were running production somewhat lower than the underlying demand. And can you tell us if you now have you ramped up accordingly?

I mean, is it is your production now running and meeting that your demand expectations in The U. S?

Matthijs van Kempenberg, President and CEO, Thule Group: Hi, Matthias here. Yes, by and large, we have, and it's a positive problem to have in this market when you have more demand than supply. But there is one product where we still would like to do a little bit faster production pace. But by and large, we are now meeting the demand as we are in mid July here.

Agnieszka Viella, Analyst, Nordea: Perfect. Thank you. Maybe follow-up on that. Do you feel that you lost any sales in Q2 specifically because of that issues?

Matthijs van Kempenberg, President and CEO, Thule Group: Well, I think there's two ways to answer that question. First of all, could we have sold more in Q2 if we had more product capacity? Yes, that is true. So from that perspective, yes, we did lose sales, but I think from a sort of total Thule Group perspective, the answer is no, because these were new products, and we've been a lot focused on bringing in innovative products to enter new niches and new adjacent segments in North America, and this is what we've been successful with. So, it's not lost versus last year, but it's a somewhat lost opportunity.

Agnieszka Viella, Analyst, Nordea: Understood. Thank you. And then just looking at your organic growth profile, you returned to growth in Q2 again now, and we assume that we don't see much deterioration in the underlying markets, what are your expectations for your growth in the coming quarters, just looking at your product launches, price increases and the trends that you see during the selling season right now?

Matthijs van Kempenberg, President and CEO, Thule Group: No. But as you know, we don't give sort of guidance or sort of clear forecast like that. But I think it's, of course, positive that what we see that we do, our own actions, is giving good results. We have been more front loaded on launches this year, but we hope that they will carry also during, of course, the rest of the high season and into the autumn, and then we have a couple of more things coming. So we are very confident that Thule will be better and better as the year progresses, and that's, of course, a long term thinking, and we have more things that will be more positive for growth.

And then it is an uncertain market out there, and even on new tariff and, well, announcementspotential announcements, I guess, happening on a daily basis almost, which impacts purchase decisions from some customers, and also some supply chain elements sometimes. So, we are very, of course, humble about things, but very confident that we'll get better, and we have more good products coming, but if the market is exactly the same or not, then we will see. But we remain focused on investing to grow, and hope that that pays off, and the market is at least not getting worse.

Agnieszka Viella, Analyst, Nordea: Thank you. And then my last question is on the bag business, quite heavy decline in the quarter, more than 20% organically. Can you just remind us about the size of the legacy business right now for you? And how fast do you expect that business to be phased out? And also, what kind of impact on profitability there could be if that business disappears?

Matthijs van Kempenberg, President and CEO, Thule Group: Yes. So I think you're very right on the dynamics, and let's make sure everybody on the call gets this. Think what's now called bags and mounts, first of all, mounts or cold lock is two thirds of that. So that's one third sort of of the previously packs, packs, and luggage business. And out of that, around 25, 30% or so is is legacy business.

The margin profile of that business is actually quite good. It's in line with with the sort of the bags category in general. Otherwise, we would, of course, have been easy decision to just delete it. But it is in product categories, which are sort of just facing macro headwinds generally or really tough marketplaces. So we're not discontinuing the products because they sell and we make money on them, and that there is a small niche even for CD wallets these days, believe it or not.

But and and the camera bags and other things, but we're not investing and building it out. So it will eventually come to a decision, of course, when it's time to stop it, but we are not there this year and probably not next year either.

Agnieszka Viella, Analyst, Nordea: Thank you.

Carly, Call Coordinator: Thank you very much. Our next question comes from Matt Liss of Kepler Cheuvreux.

Fredrik Arverson, Analyst, ABG: Matt, your line is now open. Yes.

: Hi. Thank you. A couple of questions. Well, Europe there, could you give some sort of flavor regarding different geographical areas, countries in Europe? How do you propose to develop them?

Yes, but let me double check that.

Toby Lawton, CFO, Thule Group: Yes, I can take that, Matt. But I think we give a bit of color in our report also when we talk about the regional mix. Hang on, I'm just finding the page. So I mean generally across Europe we see it's pretty even, I would say generally pretty even growth across most markets in Europe. We have our kind of strongholds Nordic and DAC areas.

I would say we're stronger when it comes to some of the juvenile products in some markets like Benelux and Nordics where we're getting traction quicker in those areas as well, which are going well, but but generally pretty.

: Yeah.

Toby Lawton, CFO, Thule Group: Pretty pretty even performance.

Matthijs van Kempenberg, President and CEO, Thule Group: I would add to that I agree fully with to's comments are pretty even I think the difference we see between the countries are of course there's for us it's more around product mix where we are stronger and weaker for example in different parts of Europe. For example where RV industry is pretty more dominant of course we had a pretty good quarter versus the market in RV that helps. So big picture, pretty even across Europe.

: Thanks, very good. And well, coming back to Quadlock, I guess there you if I remember right, you have sort of indicated that the growth had been sort of 20% plus quarter over quarter for Quadlock. Have you well, have that trend continued in the second quarter?

Matthijs van Kempenberg, President and CEO, Thule Group: Yes. I think we've when we did the acquisition, we shared some more information and also commentary on our website if you like. The category for the performance phone lines have been growing at around 10% to 12% historically, and we believe it should continue to grow around 10% going forward. And Quadlock has been beating that, sort of as the market leader, a lot of it thanks to product innovation and expansion of the product portfolio. So in Q1, the growth was over 20% for Quadlock organic and now in Q2, the growth was a bit more than 15.

So beating the market in Basically,

: you were running with in 2021, you had 40%. Good. Sounds great. And then well, you mentioned the new car seat there for older children and well, how much do that add to the total market opportunity for car seats?

Matthijs van Kempenberg, President and CEO, Thule Group: Well it's a significant piece but it's not as big as the segments will be out. So this is the smaller one, which is just one part of why it comes a bit later. But it's good also, it's a good one still, but it's also good from a product offering kind of perspective, because kids grow, right? So we start launching products for the infants and then the toddlers now with a little bit bigger products you can grow with the Tula car seat family. But it's a smaller one of the three.

: And are you fully loaded there now or should are there more to be in the Schindler's area I mean?

Matthijs van Kempenberg, President and CEO, Thule Group: Yeah. So now we have an offer when this product is out which is not yet but it will be during

: months then

Matthijs van Kempenberg, President and CEO, Thule Group: we will have the full offer between infant toddler and young children. So that feels really great in Europe. But of course you know over time we are on innovation and always pushing the boundaries. So you will see new car seat products coming from Thule in the future. Sure.

: I expect that. And then I guess I had a question there regarding, well, you have this investment program in new warehouse in Poland. Will happen with the capacity there? Is it sort of increasing or is it more that you reduce the lead time to customers and so on? And maybe if you could touch upon how it affects your ability to address the DTC segment?

Toby Lawton, CFO, Thule Group: I can take that. Hi, Mats. I think what we're doing generally is we are taking over warehousing that today is covered by outsourced three p l yeah. Logistics logistics provider. So we're we're taking over warehousing and bringing it in house.

With that, we're reducing we're reducing double handling where we we then ship it to a warehouse, which then ships it onto end customers. So we are definitely increasing capacity. We're tripling, obviously, the capacity of pallets in the warehousing program, but we're reducing one step in the materials handling. And enables us also to kind of grow our logistics service to include both legacy and regular customers across Europe in a good way with good delivery times.

Karl Derenberg, Analyst, DNB: Because the

Daniel Schmidt, Analyst, Stansbank: cash flow generation is bad.

: It doesn't sort of affect your DTC or

Toby Lawton, CFO, Thule Group: no. I mean, we still supply DTC today, and we'll do from from this warehouse in the future. So so, yeah, it it supports. Yeah.

Matthijs van Kempenberg, President and CEO, Thule Group: Exactly.

: Okay. Great. Well, thanks. That's all from me. Thank you

Carly, Call Coordinator: very much. We currently have no further questions. So I'd like to hand back to the management team for any further remarks.

Matthijs van Kempenberg, President and CEO, Thule Group: Thank you very much, everybody, for joining this call. We wish hopefully a good summer, and look forward to speaking to you again at the q three report, if not before. Thank you very

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