Vtech Holdings Limited · HKEX:303
Vtech — FY2020 Earnings Presentation
43 slides from Vtech's earnings presentation, May 18, 2020
Slide 1: VTech Holdings Limited FY2020 Annual Results Announcement
VTech Holdings Limited FY2020 Annual Results Announcement 18 May 2020
Slide 2: Financial Review
vtech Financial Review >> > >> >INNOVATION BEYOND TECHNOLOGY 9
Slide 3: Financial Highlights
Financial Highlights For the year ended 31 March (US$ M) 2020 2019 Change Revenue 2,165.5 2,161.9 0.2% Gross Profit 663.6 636.4 4.3% Gross Profit Margin % 30.6% 29.4% 1.2% pts Operating Profit 219.7 193.2 13.7% Operating Profit Margin % 10.1% 8.9% 1.2% pts Profit Attributable to Shareholders of the
Slide 4: Revenue by Region
Revenue by Region For the year ended 31 March (US$ M) 2020 % 2019 Change North America 989.6 45.7 994.5 -0.5% Europe 886.3 40.9 882.9 0.4% Asia Pacific 259.4 12.0 248.6 4.3% Other Regions 30.2 1.4 35.9 -15.9% Total 2,165.5 100.0 2,161.9 0.2% 4
Slide 5: Working Capital
Working Capital (US$ M) 31/03/20 31/03/19 Stocks 372.6 369.9 Stocks Turnover Days 102 days 100 days Trade Debtors 221.5 263.0 Trade Debtors Turnover Days 63 days 65 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ M) 31/03/20 31/03/19 Deposits and Cash 242.5 237.0 Total Borrowings - - Net Cash Position 242.5 237.0 6
Slide 7: Operations Review
vtech Operations Review >> > >> >INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Impact of COVID-19
Impact of COVID-19 • Disruptions to supply and demand for products • Supply: CNY holiday extended; factories in mainland China required to resume work in phases Production facilities for CMS in Malaysia ceased production in mid-March 2020 on “movement control order” Production capacity returni
Slide 9: Costs
Costs • Gross profit margin rose from 29.4% to 30.6% • Lower materials prices • Direct labour costs benefitted from RMB depreciation • Manufacturing overheads stable 9
Slide 10: US-China Trade Tension
US-China Trade Tension • Phase one trade deal between China and US signed on 15 January 2020 • 15% tariff imposed on residential cordless phones on 1 September 2019 reduced to 7.5%, effective 14 February 2020 • Some CMS customers affected, with tariffs ranging from 7.5% to 25% • All but a few ELPs e
Slide 11: North America
North America Revenue by Product Line (US$ million) • Revenue decreased 0.5% to US$989.6 ELPs million, 45.7% of Group revenue 493.7 (+3.6%) • Higher ELPs sales insufficient to offset lower revenues of TEL products and CMS • ELPs revenue rose 3.6% to US$493.7 million Higher sales of LeapFrog and VT
Slide 12: North America (continued)
North America (continued) • Standalone Products: LeapFrog: Robust growth, driven by higher sales of infant, toddler and preschool products VTech: Higher sales of preschool products and Kidi line offset declines in infant and toddler products, KidiZoom Camera and Go! Go! Smart family of products
Slide 13: North America (continued)
North America (continued) • Platform Products: Lower sales for both brands LeapFrog: Sales decline of children’s educational tablets offset contribution from RockIt Twist and Magic Adventures Globe LeapStart Go expands reading platforms line-up VTech: Lower sales of KidiBuzz offset higher sa
Slide 14: North America (continued)
North America (continued) • Go! Go! Cory Carson: Animation on Netflix premiered in January 2020, with good response • Playsets and vehicles based on the characters reached US shelves in March 2020 • LeapFrog Academy: Steadily growing subscriber base • Awards: Five TOTY finalists, Walmart’s “Top Rate
Slide 15: North America (continued)
North America (continued) • TEL products revenue decreased 7.4% to US$243.9 million, with lower sales of residential phones, commercial phones and other telecommunication products • Residential Phones: Sales decreased on fixed-line telephone market contraction Rate of decline moderated on becomi
Slide 16: North America (continued)
North America (continued) • Commercial Phones and Other Telecommunication Products: Lower sales of SMB phones, hotel phones, headsets and baby monitors offset growth in VoIP phones and conference phones SMB phones: Sales reduced as VTech’s range reached end of life-cycle Hotel phones: Face pre
Slide 17: North America (continued)
North America (continued) • Commercial Phones and Other Telecommunication Products: Baby monitors: Sales declined overall as a number of customers reduced orders VTech gained market share and remained no. 1 baby monitor brand in US and Canada VoIP phones: Snom products contributed to overall g
Slide 18: North America (continued)
North America (continued) • CMS revenue down 1.0% to US$252.0 million • Growth in professional audio equipment and medical and health products offset by lower sales of industrial and communication products Professional audio: Sales grew as order backlog cleared on improved materials supply, while
Slide 19: North America (continued)
North America (continued) Medical and health products: Higher sales on more orders for hearing aids, as customer transferred in-house production to VTech and contracted for finished products Industrial products: Sales decreased on lower orders for note counting machines and electronic locks Co
Slide 20: Europe
Europe Revenue by Product Line (US$ million) • Revenue up 0.4% to US$886.3 million, 40.9% of Group revenue ELPs 333.3 • Higher sales of CMS offset lower revenues (-3.0%) of ELPs and TEL products • ELPs revenue down 3.0% to US$333.3 million Markets affected by weakness of European currencies, linge
Slide 21: Europe (continued)
Europe (continued) • Standalone Products: VTech: Sales declined as lower sales of infant and toddler products, Toot-Toot family of products and Kidi line offset growth in preschool products, KidiZoom Camera and Switch & Go Dinos Introduced new ZoomiZooz animal playsets LeapFrog: Sales increase
Slide 22: Europe (continued)
Europe (continued) • Platform Products: Sales down as higher sales of LeapFrog products insufficient to compensate for lower sales of VTech products LeapFrog: Growth driven by new products launches, including Magic Adventures Globe, RockIt Twist, LeapStart Go This offset sales declines in chil
Slide 23: Europe (continued)
Europe (continued) • TEL products revenue decreased 6.0% to US$112.5 million Lower sales of residential phones offset growth in commercial phones and other telecommunication products • Residential Phones: Sales declined as fixed-line telephone market contracted further and existing customers red
Slide 24: Europe (continued)
Europe (continued) • Commercial Phones and Other Telecommunication Products: Sales growth mainly driven by CAT-iq handsets and CareLine range CAT-iq handsets: Sales boosted by new German customer and start of shipment to UK telecoms operator CareLine range: Increased orders from existing custo
Slide 25: Europe (continued)
Europe (continued) Conference phones: Modest growth VoIP phones, hotel phones and baby monitors: Stable IADs: Lower sales on reduction in orders 25
Slide 26: Europe (continued)
Europe (continued) • CMS revenue grew 5.0% to US$440.5 million • Growth in majority of product lines Hearables: Good sell-through of customer’s products and new project launch Professional audio: Supported by clearing backlog for a major customer; strong demand for a customer’s new products Io
Slide 27: Europe (continued)
Europe (continued) Medical and health products: Revenue from hearing aids rose as customer contracted VTech to make finished products, plus a new hair removal product customer Home appliances: Sales increased on improvement in market demand for key customers Communication products: Production
Slide 28: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue increased 4.3% to ELPs US$259.4 million, 12.0% of Group 83.2 (+2.5%) revenue • Higher sales of ELPs and CMS offset lower sales of TEL products • ELPs revenue up 2.5% to US$83.2 million, led by growth in Australia, Korea and Japan CMS TEL 1
Slide 29: Asia Pacific (continued)
Asia Pacific (continued) • Australia: Benefitted from broader listings and more shelf space • Korea: Growth driven by higher sales of LeapFrog products • Japan: Benefitted from relaunch of VTech brand in a major toy retailer • Mainland China: COVID-19 led to lower sales in offline channels in Q4 FY2
Slide 30: Asia Pacific (continued)
Asia Pacific (continued) • TEL products revenue declined 21.2% to US$27.9 million, with decreases in most markets Hong Kong: Sales rose on increased orders for IADs Australia: Sales fell as lower residential phone sales offset higher baby monitor sales Japan: Sales affected by a customer’s fin
Slide 31: Asia Pacific (continued)
Asia Pacific (continued) • CMS revenue up 12.3% to US$148.3 million • Higher sales of professional audio equipment offset declines in medical and health products, home appliances and communication products Professional audio: Boosted by full year contribution from DJ equipment business Medical a
Slide 32: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue down 15.9% to US$30.2 million, ELPs 1.4% of Group revenue 12.1 (-6.9%) • Lower sales of ELPs and TEL products offset higher sales of CMS • ELPs revenue down 6.9% to US$12.1 million. Higher sales in Middle East offset by lower sales in Lat
Slide 33: Outlook
vtech Outlook >> > >> >INNOVATION BEYOND TECHNOLOGY 33
Slide 34: Outlook
Outlook Unprecedented COVID-19 crisis makes outlook highly uncertain • Group’s key markets still in different stages of lockdown • Lower orders and demand for products • Revenues from all businesses expected to decrease in FY2021 34
Slide 35: Outlook
Outlook To mitigate impact of lower orders and weaker demand: • Streamline operations and slow new CAPEX • Inventory management tightened • Accounts receivable closely monitored • Stepping up efforts to increase sales to e-tailers and other online channels • Speed up product development and roll out
Slide 36: Outlook: ELPs
Outlook ELPs • Focus on strengthening market leadership through new product launches and expansion in Asia Pacific • Standalone Products: New VTech and LeapFrog infant, toddler and preschool products Myla’s Sparkling Friends adds to robotics category Kidi line to benefit from arrival of KidiZo
Slide 37: Outlook
Outlook • Platform Products: New generation of KidiBuzz/KidiCom Max • Asia Pacific: Mainland China: Stepping up digital marketing and increasing sales to online channels Japan and Malaysia: Increasing penetration through channel expansion and more product introductions 37
Slide 38: Outlook: TEL products
Outlook TEL products • HD video baby monitors and super-long range residential cordless phones delivered 2H FY2020 will contribute to revenue • New Snom VoIP phones to drive growth in commercial phones • Newly designed SIP and PSTN based hotel phones to regain market share 38
Slide 39: Outlook: TEL products
Outlook TEL products • Anti-bacterial technology to be applied to Snom business phones and hotel phones • Baby monitor with baby care app to strengthen VTech’s lead in US and Canada • New IADs with Wi-Fi 6 standard to expand the category 39
Slide 40: Outlook: CMS
Outlook CMS • Customers revising orders on COVID-19 impact • NPI centre to open in Shenzhen in Q2 FY2021, targeting start-ups 40
Slide 41: Rationalising production base
Outlook Rationalising production base: • Signed an agreement in Dec 2019 to acquire second manufacturing facilities in Malaysia • Comprises over 500,000 square feet of buildings in Penang • Expect to commence operations by end of FY2021 • Existing CMS facilities in Muar to expand in two phases, addi
Slide 42: Q&A
vtech Q&A >> > >> > INNOVATION BEYOND TECHNOLOGY 42
Slide 43: Thank You
vtech Thank You >> > >> >INNOVATION BEYOND TECHNOLOGY 43