Vtech Holdings Limited · HKEX:303
Vtech — FY2016 Earnings Presentation
33 slides from Vtech's earnings presentation, May 17, 2016
Slide 1: VTech Holdings Limited FY2016 Annual Results Announcement
VTech Holdings Limited FY2016 Annual Results Announcement 17 May 2016
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) 2016 2015 Changes Revenue 1,856.5 1,879.8 -1.2% Gross Profit 583.3 610.5 -4.5% Gross Profit Margin % 31.4% 32.5% -1.1% pts Operating Profit 202.3 220.1 -8.1% Operating Profit Margin % 10.9% 11.7% -0.8% pts Profit Attributable to Shareholders o
Slide 4: Revenue by Region
Revenue by Region For the year ended 31 March (US$ M) 2016 % 2015 Change North America 878.3 47.3 899.5 -2.4% Europe 795.9 42.9 812.3 -2.0% Asia Pacific 129.0 6.9 117.6 9.7% Other Regions 53.3 2.9 50.4 5.8% Total 1,856.5 100.0 1,879.8 -1.2% 4
Slide 5: Working Capital
Working Capital (US$ M) 31/03/16 31/03/15 Stocks 285.4 290.2 Stocks Turnover Days 93 days 96 days Trade Debtors 230.3 221.9 Trade Debtors Turnover Days 63 days 57 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ M) 31/03/16 31/03/15 Deposits and Cash 273.0 294.2 Total Borrowings -- -- Net Cash Position 273.0 294.2 6
Slide 7: Operations Review
vtech Operations Review >> > >> >INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Costs
Costs • Gross profit margin declined due to foreign exchange headwinds and change in product mix • Cost of material as % of Group revenue was higher, despite lower cost of material • Direct labour costs declined • Number of workers reduced by 9.9% year-on-year • Higher manufacturing overhead 8
Slide 9: Data Breach due to Cyber-Attack
Data Breach due to Cyber-Attack • FY2016 results affected by the data breach as a result of a cyber-attack • Learning Lodge offline during key holiday period • Strengthened data protection • Stolen customer data recovered 9
Slide 10: North America
North America Revenue by Product Line (US$ million) • Revenue down 2.4% to US$878.3 million, 47.3% of Group revenue ELPs 314.4 • Lower TEL products revenue offset higher (+4.8%) sales of ELPs and CMS • ELPs revenue increased by 4.8% to US$314.4 million − Led by higher sales of standalone products −
Slide 11: North America (continued)
North America (continued) − Platform: Growth in Kidizoom Smartwatch range unable to offset declining sales of InnoTab and its software − Cyber-attack impacted sales − Kidizoom Smartwatch DX performed strongly − Rolled out InnoTV 11
Slide 12: North America (continued)
North America (continued) • TEL products revenue decreased by 10.7% to US$371.4 million − Growth in commercial phones and other telecommunication products insufficient to offset lower sales of residential phones − Sales decline in residential phones due to continued market contraction − Maintained l
Slide 13: North America (continued)
North America (continued) − Sales of commercial phones and other telecommunication products continued to rise − Baby monitors, new four-line small business phone systems, ErisStation and ErisTerminal saw sales increase 13
Slide 14: North America (continued)
North America (continued) • CMS revenue up 4.9% to US$192.5 million − Higher sales of professional audio equipment, industrial products and home appliances offset lower sales of solid-state lighting, communication and medical and health products 14
Slide 15: North America (continued)
North America (continued) − Professional audio: A number of positive factors − Industrial products: Supplier consolidation − Home appliances: More orders from existing clients − Solid-state lighting: Fall in demand for customer’s products − Communication products: Lower sales from a few existing cus
Slide 16: Europe
Europe Revenue by Product Line (US$ million) • Revenue down 2.0% to US$795.9 million, 42.9% of Group revenue ELPs 325.5 • Lower sales of ELPs and TEL products (-10.2%) offset higher CMS revenue • ELPs revenue down 10.2% to US$325.5 million − Sales decline in US dollar terms was driven by depreciatio
Slide 17: Europe (continued)
Europe (continued) − Standalone: Sales decrease − Lower sales of core infant, toddler, pre-school learning products and Switch & Go Dinos − Toot-Toot family and Little Love saw growth − Kidizoom Action Cam, Flipsies brought additional revenue − Platform: Lower sales − Sales of InnoTab/Storio contrac
Slide 18: Europe (continued)
Europe (continued) • TEL products revenue declined by 13.3% to US$136.4 million − Sales growth in commercial phones and other telecommunication products unable to offset fully residential phone sales decline − Lower sales of residential phones on market contraction, compounded by weak Euro reducing
Slide 19: Europe (continued)
Europe (continued) • CMS revenue rose by 14.3% to US$334.0 million • Sales increases in all product categories − Professional audio: More projects from existing customers, sales contribution from new customers − Hearables: Revenue share gain with a major customer, ramp-up of orders for world’s first
Slide 20: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue increased by 9.7% to US$129.0 million, 6.9% of Group revenue ELPs 40.9 (+57.9%) • Higher sales of ELPs and CMS offset decline in TEL products • ELPs revenue up 57.9% to US$40.9 million, driven by growth in China, Australia and Japan • TEL
Slide 21: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue up 5.8% to US$53.3 million, 2.9% of Group revenue ELPs 11.5 (-22.3%) • Other Regions comprise Latin America, the Middle East and Africa • ELPs revenue down by 22.3% to US$11.5 million. Growth in the Middle East and Africa offset by lower
Slide 22: Acquisition of LeapFrog
Acquisition of LeapFrog 22 22
Slide 23: Acquisition of LeapFrog
Acquisition of LeapFrog • Announced acquisition of LeapFrog in February 2016 • Consideration: approx. US$72 million • Financed by internal resources • Acquisition completed on 4 April 2016 • LeapFrog is now an indirect wholly- owned subsidiary of VTech 23
Slide 24: Complementary Overall Strengths
Complementary Overall Strengths • Stronger brand name in • Strong educational toy Brand Europe brand Geography • Stronger in Europe • More US focused • Performs well in • Stronger in platform Product standalone products products • Has an edge in content • Excels in technology and Talent development,
Slide 25: Outlook
vtech Outlook >> > >> >INNOVATION BEYOND TECHNOLOGY 95
Slide 26: Outlook - Overview
Outlook - Overview • Expect higher revenue in FY2017 • Profitability to be impacted by integration of LeapFrog, which will make a negative contribution • Material costs expected to be largely stable, but labour costs and manufacturing overhead to rise moderately • Will continue to offset cost increa
Slide 27: Outlook: ELPs
Outlook ELPs • Revenue forecast to grow • Immediate sales contribution from the acquisition of LeapFrog • Sales of standalone products to increase: − Expanded baby line, Go! Go! Smart Wheels − Princess themed Go! Go! Smart Friends − New Little Love/Baby Amaze, core infant, toddler and pre-school pro
Slide 28: Outlook: ELPs platform products
Outlook ELPs • Sales of platform products to grow, with combined VTech and LeapFrog offerings: − Touch & Learn Activity Desk Deluxe − Roll out DigiGo to US − Kidizoom Smartwatch DX to launch in Europe − New LeapFrog multi-activity learning platform − Strong presence in children’s educational tablets
Slide 29: Outlook: TEL products
Outlook TEL products • Business expected to improve • Commercial phones and other telecommunication products to grow: − Momentum in baby monitors to be maintained − Sales of CAT-iq handsets continue to grow, based on technology shift − ErisTerminal: New models; new project in Korea − ErisStation: Wi
Slide 30: Outlook: TEL products residential phones
Outlook TEL products • Decline in residential phones expected to moderate • US: Capture more market share by growing online sales, launching new products with enhanced Connect-to-Cell features • Europe: Business expected to stabilise • Asia Pacific: Higher sales in Australia and Japan will support g
Slide 31: Outlook: CMS
Outlook CMS • Forecast higher sales • Professional audio: Expect to grow further • Hearables: Target more business in miniaturised electronic devices • Industrial products: Continue to benefit from consolidation of suppliers by a customer • Switching mode power supplies: Change of ownership of a cus
Slide 32: Outlook: CMS asset acquisition
Outlook CMS • Signed an agreement to acquire the assets from a third party • Will extend VTech CMS supply chain vertically, securing supply of high- precision metal tooling and parts • Contribution would start in Q4 FY2017 32
Slide 33: Thank You
vtech Thank You >> > >> > INNOVATION BEYOND TECHNOLOGY 33