Earnings call transcript: Profoto Q3 2025 sees sales drop amid LED shift

Profoto Holding AB reported a challenging third quarter of 2025, with a significant decline in sales and a shift in technology focus. The company’s revenue fell by 28% to SEK 119 million, while organic growth was negative at 23%. Despite the challenging environment, InvestingPro data shows the company maintains impressive gross profit margins of 84% and trades at an attractive P/E ratio of 9.8x. Profoto is transitioning from traditional flash to LED technology, introducing several new products to adapt to changing market demands.

Key Takeaways

• Sales decreased by 28% to SEK 119 million.
• Organic growth was negative at 23%.
• New LED products are set to launch, targeting cinema and photography channels.
• Cost reduction plan aims for a 20% annual reduction.
• Regional sales varied, with APAC showing a 10% increase.

Company Performance

Profoto’s overall performance in Q3 2025 was marked by a significant downturn in sales, particularly in the Americas, which saw a 40% decline. The EMEA region experienced a 15% drop, while APAC managed a 10% increase, highlighting regional disparities in market demand. The company is navigating a technological shift from flash to LED lighting, which has impacted its traditional business model.

Financial Highlights

• Revenue: SEK 119 million, down 28% year-over-year.
• EBIT: Loss of SEK 10 million, with an EBIT margin of -8%.
• Year-to-date sales: Down 11% organically.

Outlook & Guidance

Profoto anticipates the initial sales impact of its new LED products by the end of the year, with more substantial effects expected in Q2 of the following year. The company is maintaining similar margins for its new LED product line and continues to invest in next-generation technology. InvestingPro subscribers can access detailed financial health scores and comprehensive analysis through the Pro Research Report, which provides actionable insights on Profoto’s technological transition and growth prospects.

Executive Commentary

CEO Anders Hedebark highlighted the need for change, stating, "Sales is down because of weak demand of the willingness to invest in capital goods." CFO Linus Marmstedt emphasized the importance of returning to top-line growth to improve margins, saying, "We really need to change, coming back to top line growth in order to actually increase the margins."

Risks and Challenges

• Weak demand in capital goods affects sales.
• Technological shift from flash to LED requires strategic adaptation.
• Increased competition from Chinese companies.
• Macroeconomic uncertainties, particularly in the U.S., pose challenges.

Q&A

During the earnings call, analysts inquired about the progress of new LED products, with management confirming they are on track for launch. Questions also focused on the impact of tariffs, which the company noted were limited to 10-19% on imports. Dealer inventory levels were reported to be lower at the beginning of Q4 compared to Q3, indicating potential inventory management improvements.

Full transcript - Profoto Holding AB (PRFO) Q3 2025:

Tom, Head of Investor Relations, Profoto: My name is Tom, and I’m Head of Investor Relations. Today, I have with me our CEO, Anders Hedebark, and our CFO, Linus Marmstedt. I’ll now hand over to Anders, who will start off by giving you a summary of the quarter.

Anders Hedebark, CEO, Profoto: Good morning, everyone. Thank you for joining in and listening in to our third quarter report. Sales were not good in the quarter. It decreased by 28% to SEK 119 million. The organic growth was negative with 23%, and the reason for this is the uncertainty in the macroeconomic situation, especially in the United States. We also had a dealer inventory buildup in the previous quarter. Consequently, EBIT is not good either. We are losing SEK 10 million, which is a -8% EBIT margin. As we said, it’s negative sales, but we are also having a higher cost of goods sold due to the tariffs in the United States. We also have a changed relationship between capitalization and depreciation, and Linus will cover that in more detail. Let’s go to the next slide, please. Weak demand in our larger markets for the quarter. We could explain partly the lower U.S.

sales by a larger sell-in prior to the new tariffs and increased price, and consequently, the price increases in the United States. That’s one of the reasons, but we also see a lower customer demand. Dealers and customers are not only cautious in the United States, but also in Europe. This has the same reasons. On the other hand, we see a slightly better effect in APAC, especially in China. This is due to a number of major larger customer deliveries that is driving this positive development. All in all, we have a sales decline by 22.6% for the group. America is down severely with 40%, EMEA 15%, and APAC is a plus 10%. In addition to this, we also have a currency effect where the Swedish krona has appreciated over the quarter in comparison with last year. We can take the next slide, please.

On the year-to-date figures, sales is down 11% organically. The reasons and the explanation for this is the same, where we see a damped demand. We also see a higher competition from competitor, as well as a technological shift from flash to constant light LED. Here, we have a group total decline of 10%, and in addition to that, we have a currency effect of almost 4% for the group, where we see that America is having the biggest problems all in all. EMEA is down 5%, and APAC is down a little bit more than 2%. Including the currency effect, we have a decline of 14.4%. We see the customer needs and demands changing, but we are continuing delivering our plan where we are moving, and we are following the customer demand and moving more towards LED-based solutions.

This is continuing, and we’re starting to ship and invoicing now in this quarter, partly part of the product, especially the point source unit with the L1600D, L1600 Color, and L1600 Daylight. The panel, we will start to ship during the first quarter next year. We think that we are well positioned for this change, and with our LED portfolio, we are the premium brand for continuous light, as well as flash for shooting video and still in the same bay, in the same studio. We are meeting those demands long term, is our ambition, and this is what we are developing new products and solutions for. Thank you. I will leave the word to you, Linus.

Linus Marmstedt, CFO, Profoto: Okay. Thank you. This slide and the graph clearly show the effect on EBIT when we have a decline of top line of over 20%. It is, of course, really hard to then compensate that on a cost reduction basis. Also, given the gross margin that we have, you see a clear effect on EBIT. The third quarter is also not a slow quarter, but we historically have lower sales, which has, of course, an impact when you have a more or less fixed cost base. You know that we have recorded some one-off effect during the quarter of totally SEK 47 million, which leads us to an adjusted EBIT of minus SEK 10 million. I will come back to it, but one shouldn’t say major explanation, but we had an impact during the quarter of the ratio between capitalization and amortization.

I will elaborate on that a little bit later. Here is the, I shouldn’t say long-term trend, but we have, as you know, had a number of quarters with a top line decline, which we tried to compensate by reduction cost, but the full effect hasn’t been seen yet. This is, as I said before, not my favorite slide. We really need to change, coming back to top line growth in order to actually increase the margins. I mean, we’re not sitting still, so we are doing a lot to really take actions to meet this changing market condition, as Anders Hedebark touched upon on the previous slides. The cost reduction plan is going according to plan. The total annual effect will be a reduction of over 20%, and that corresponds to a reduction of the cost base of up to SEK 80 million on an annual basis.

You know that we acquired StyleShoots in 2022, and we have seen the effect on top line after the pandemic. We have done a number of actions to really compensate for the weak development, actually, in the acquired business. During the quarter, we took some reduction costs, restructuring costs to reduce costs, and that’s mainly personnel. We did an impairment reduction of the overvalues of SEK 11 million. In total, it’s SEK 7 million related to StyleShoots. During the quarter, we also did some minor adjustments on the valuation of our asset in the capitalization of assets related to our product portfolio. That’s related to a changed business case just for a small handful number of products. All in all, we still believe that we have a really strong balance sheet. This is, as I said, we are following our paths of reduction of the cost base.

I think we have done quite substantial reductions. On an annual basis, we are very sure or certain that we will reach our target of an annual reduction of 20%. As you can see, if we start with the end of last year, we have actually reduced it slightly more than the 20%. On an annual basis, it’s 20%. We are the full effect by the end of this quarter, the fourth quarter this year. This is just to show the change in what during this quarter is the first time that the depreciations are higher than the capitalization. This actually has, if you compare to the same quarter last year, quite a substantial impact on EBIT. It is more to give some background and give more color on the EBIT number that I think is quite important to bear in mind.

This is a consequence of when we have a reduction in R&D spend and also that we have now launched a number of products that we are now starting to depreciate on. That’s a double effect.

Anders Hedebark, CEO, Profoto: Thank you, Linus. Before questions, let me just summarize what we have said. Sales is down because of weak demand of the willingness to invest in capital goods. In general, it’s down in our area in content creation, visual content creation. It is also very slow. It is also the technological change from flashlight to continuous light or to LED that is affecting our sales, as well as harder competition overall in the market. We are taking several actions to meet these new market conditions, and we are working very hard both in sales and product development to deliver on exactly that. As you said, Linus, we are also cutting costs in order to adjust to the new situation for the company. We are continuing to invest in the next generation technology for video and still in the same studio to shift the transition that the market is undergoing.

Thank you very much.

Tom, Head of Investor Relations, Profoto: Great. We will now open up for questions.

Conference Operator: If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Marcella Klang from Handelsbanken. Please go ahead.

Good morning. A couple of questions from my side. You mentioned the expected start of deliveries of the LED portfolio, L1600 and L1600. We are now almost at the end of October. Have you started deliveries of these products? What is the pre-order situation? When do you expect the effect on sales? That’s the first question.

Anders Hedebark, CEO, Profoto: Good morning, Marcella. We would expect some effect as we earlier communicated by the end of the year. During this quarter, we should see some sales effect towards the end of the year. For this quarter, we will see some effect. More effect will come basically in the second quarter and some more in the first quarter next year. The real effect we foresee is until the summer next year.

Linus Marmstedt, CFO, Profoto: You are right, Marcella. I mean, we are about to launch them. There is no question that we are now in the end of October, and the products are not delayed or anything like that. We will launch and ship them according to plan.

Could you give us a little bit more color on pre-orders on this portfolio? If not through pre-orders, what is the main sales channel for this? Since we are talking about bigger effect in Q1 or Q2, maybe you can include the LED panel into the answer. Thank you.

Anders Hedebark, CEO, Profoto: I can’t give you a definite figure, of course, for the number of pre-orders because we’re not talking about that officially, of course. The main channel is the same for the point source units. The L1600 and L1600D LED is primarily the same channel as we’re using today. In addition to that, we are also filling channels and selling through dedicated video and cinema channels. That is number one for the point source products. In addition to this, the panel is more positioned towards cinema. Here, we will work directly with some of the larger rental companies to actually ensure that they have these on stock and availability. We have already started that with some pre-units, with one of the larger rental companies in the UK. We have a good positive effect.

To repeat then, for the panel, the channel is both the existing channel as well as new dealers in the cinema space and new rentals in the cinema space. Whereas the point source is generally both for the photographic and for the cinema video channel.

Thank you. In terms of production, since this is a completely new product portfolio for you, the products, are they ready? Are there any production hiccups since it’s a new production facility and so on?

No, we have started the production of, of course, the point source units that we’re shipping this quarter. The production for the panels will start towards the end of or beginning of next year, so around Christmas. We don’t have any hiccups in production.

Sounds good. Margins. Profoto is a company with an impressive track record in terms of profitability, margins above 25% on operational level for the traditional product portfolio. How do you expect profitability for the new generation? Will you be able to reach similar profitability from the start? Do you expect maybe profits starting just to be able to spread the product? Can you give us some kind of indication on your targets with the new portfolio?

We are entering a new area in the LED with slightly new customers. Of course, we will work with the price in order to get into the strategic rentals and studios that we need to get into. We expect more or less the same margin, maybe slightly lower in LED in comparison with flash, but not a major difference.

Linus Marmstedt, CFO, Profoto: That’s, of course, related to the gross margin that Anders is referring to. Your other, what you touched upon, Marcella, regarding the EBIT margin, that’s very much related to top line. I mean, that’s the most important part of that equation, actually.

Thank you. Maybe a couple of questions regarding the non-LED portfolio. You mentioned the positive sales situation in APAC. What product groups are selling there?

Anders Hedebark, CEO, Profoto: These are studio products, photographic flash that are selling. There are some larger studios that have this effect, and that’s why. There is always like that. The sales during the quarter is SEK 33 million. It has the effect of one or two larger deals that has a major effect. This is just an effect of smaller numbers, I would say. What we can say, these are the deliveries to one of the greatest brands in the world. The big brands are continuing to invest in their studio capability to shoot great content to build their brands. There is no change whatsoever in that kind of demand. As you know, Profoto is having rather high market share to that type of customers.

Thank you. Given the fact that in APAC, demand is strong and we have weakness in the U.S. with all the new tariffs over South America, can you help us how big tariffs are hitting your products in the U.S.? 20% or even more?

No, not more. As you know, we are producing our products in Europe or in Southeast Asia and Thailand, where the tariffs are based on the import tariffs from Europe and Thailand. There are 10%, respectively 19% from those countries. We are also buying some components from China or some accessories, but that is less than 10% of total sales. It has an effect, but not a major effect on the cost of goods sold. We are also working on the way that we are exporting our products. We are following, obviously, all legal requirements. That is why we have an effect, and we are following the transfer pricing rules. We need to export in the right way. We are developing that in the way so that partly some last finish of the products are being now made in the United States.

We have moved some work into the United States in order to lower the tariff levels, but they’re not disappearing.

It doesn’t seem like that. Yeah.

No, we haven’t started that for that quarter. It started towards the end of the third quarter.

You mentioned dealer inventory situation during the third quarter, inventory buildup earlier and so on. Can you give any kind of your own estimate on your dealer inventory situation right now, end of October?

Please repeat the dealer inventory right now.

Dealer inventory situation now. Are the inventories empty? If there is any additional demand, does it need to come from you? Or is there still a comfortable inventory situation for your dealers?

I don’t know how to answer that because we don’t have the full visibility so that we could comment on that. Obviously, the dealer level has been brought down from the beginning of the third quarter towards the end of the third quarter. This is the effect that we see, partly the effect that we see. The inventory levels are lower now, beginning fourth quarter than beginning third quarter.

Yes. A final question from me. Are you hearing anything about your customers maybe picking Chinese competitors over your products, cheaper competitors? Is it your belief that they are waiting, that you are not losing market share, but that your customers are waiting?

No, as I said, we have an effect of higher competition from competitors. That is partly from Chinese competitors. Of course, we’re meeting competitors, and customers are evaluating whether to buy competitor products or Profoto products. Of course, we’re not winning all those battles.

Thank you so much. That was all from me.

Thank you.

Conference Operator: As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time. I hand the conference back to the speakers for any written questions or closing comments.

Tom, Head of Investor Relations, Profoto: I have not received any written questions today. I just wanted to round off by saying thank you for joining us this morning. A gentle reminder about our year-end report, which is published on February 11th. Thank you.

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