Vtech Holdings Limited · HKEX:303
Vtech — H1 FY2023 Earnings Presentation
36 slides from Vtech's earnings presentation, Nov 10, 2022
Slide 1: VTech Holdings Limited 2022/2023 Interim Results Announcement
VTech Holdings Limited 2022/2023 Interim Results Announcement 10 November 2022
Slide 2: Financial Review
vtech Financial Review >> > >> > INNOVATION BEYOND TECHNOLOGY 2
Slide 3: Financial Highlights
Financial Highlights For the six months ended 30 September (US$ million) 2022 2021 Change Revenue 1,164.8 1,114.8 4.5% Gross Profit 329.4 304.9 8.0% Gross Profit Margin % 28.3% 27.4% 0.9% pts Operating Profit 99.0 90.8 9.0% Operating Profit Margin % 8.5% 8.1% 0.4% pts Profit Attributable to Sharehol
Slide 4: Revenue by Region
Revenue by Region For the six months ended 30 September (US$ million) 2022 % 2021 Change North America 530.5 45.5 497.9 6.5% Europe 470.4 40.4 485.8 -3.2% Asia Pacific 152.2 13.1 119.0 27.9% Other Regions 11.7 1.0 12.1 -3.3% Total 1,164.8 100.0 1,114.8 4.5% 4
Slide 5: Working Capital
Working Capital (US$ million) 30/09/22 31/03/22 30/09/21 Stocks 570.0 553.3 599.4 Stocks Turnover Days 140 days 131 days 141 days Trade Debtors 487.4 325.4 507.9 Trade Debtors Turnover Days 62 days 65 days 66 days 5
Slide 6: Liquidity Position
Liquidity Position (US$ million) 30/09/22 31/03/22 30/09/21 Deposits and Cash 103.3 195.8 52.2 Total Borrowings (93.2) ‒ (26.4) Net Cash Position 10.1 195.8 25.8 6
Slide 7: Operations Review
vtech Operations Review >> > >> > INNOVATION BEYOND TECHNOLOGY 7
Slide 8: Costs
Costs • Gross profit margin rose to 28.3% from 27.4% • Increase in gross profit margin mainly attributable to: Higher selling prices Lower cost of materials, direct labour costs and manufacturing overheads • These offset negative impact of: Depreciation of major currencies against the US dolla
Slide 9: US-China Tensions
US-China Tensions • US Department of Commerce has published new technology restrictions on mainland China • No impact on Group’s businesses • Neither Group’s products nor equipment used in production affected 9
Slide 10: Manufacturing Footprint
Manufacturing Footprint • Strategy of rationalising manufacturing base • Implementation began in August 2018 with first manufacturing facilities in Malaysia, in Muar • Since then, the Group has expanded in Malaysia and to Mexico, with acquisition of two more facilities in Penang in 2020 and Tecate i
Slide 11: North America
North America Revenue by Product Line (US$ million) • Revenue increased 6.5% to US$530.5 million, ELPs 45.5% of Group revenue 266.5 (+4.5%) • Higher sales of ELPs and CMS offset lower sales of TEL products • ELPs revenue rose 4.5% to US$266.5 million Growth driven by standalone products, on-time d
Slide 12: North America (continued)
North America (continued) • Standalone products: Sales growth for both brands VTech: Preschool products, KidiZoom cameras, Kidi line, Switch & Go Dinos and Marble Rush posted higher sales Offset declines in infant and toddler products and Go! Go! Smart family of products LeapFrog: Higher sal
Slide 13: North America (continued)
North America (continued) • Platform products: Sales decline, mainly due to lower sales of VTech products VTech: Higher sales of KidiZoom Smartwatches insufficient to offset lower sales of Touch & Learn Activity Desk, while KidiBuzz sales steady LeapFrog: Sales increased slightly. Interactive
Slide 14: North America (continued)
North America (continued) • TEL products revenue fell 5.6% to US$123.9 million, with declines for commercial and residential phones offsetting growth in other telecommunication products • Commercial phones: Analog commercial phones: Shipments reduced on tight semiconductor supply Headsets: Sales
Slide 15: North America (continued)
North America (continued) • Residential phones: Sales lower as market declined and shipments constrained by tight semiconductor supply Regained distribution in a key retailer; strengthened leadership in US residential phones market • Other telecommunication products: Baby monitors: Higher sale
Slide 16: North America (continued)
North America (continued) • CMS revenue increased 25.5% to US$140.1 million • Growth driven by professional audio equipment and industrial products as business activity recovered and component shortages improved • Professional audio equipment: Sales grew on increased demand for power amplifiers and
Slide 17: North America (continued)
North America (continued) Industrial products: Growth driven by more orders for PCBA for coin and note recognition machines and electronic locks Solid-state lighting: Sales declined as a major customer reduced orders Medical and health products: Sales remained stable 17
Slide 18: Europe
Europe Revenue by Product Line (US$ million) • Revenue decreased 3.2% to US$470.4 million, 40.4% of Group revenue ELPs 159.3 (+5.4%) • Higher sales of ELPs insufficient to offset lower sales of TEL products and CMS • ELPs revenue rose 5.4% to US$159.3 million The increase came despite depreciation
Slide 19: Europe (continued)
Europe (continued) • Standalone products: Sales increases for both brands VTech: Preschool products, electronic learning aids, KidiZoom cameras, Kidi line, Marble Rush and eco-friendly toys saw growth, offsetting declines in Toot-Toot family of products Sales of infant and toddler products and
Slide 20: Europe (continued)
Europe (continued) • Platform products: Sales decrease for both brands VTech: Lower sales of children’s educational tablets, KidiZoom Smartwatches and Touch & Learn Activity Desk offset growth in KidiCom range of products LeapFrog: Higher sales of Magic Adventures Globe offset by lower sales o
Slide 21: Europe (continued)
Europe (continued) • TEL products revenue decreased 2.9% to US$46.3 million Sales declines of commercial phones and other telecommunication products offset growth in residential phones • Commercial phones and other telecommunication products: Snom branded SIP phones and hotel phones: Sales impac
Slide 22: Europe (continued)
Europe (continued) CAT-iq handsets: Sales declined on reduced orders from customers Baby monitors: Sales increased on channel expansion and new product launches, including the introduction of LeapFrog models in Germany • Residential phones: Growth driven by increased orders from existing ODM c
Slide 23: Europe (continued)
Europe (continued) • CMS revenue decreased 7.7% to US$264.8 million Growth from professional audio equipment, IoT products and smart energy storage systems failed to offset lower sales of hearables, medical and health products and communication products Hearables: Sales declined on lower demand
Slide 24: Europe (continued)
Europe (continued) Professional audio equipment: Sales increased on higher orders for audio interface products and recovery in demand for audio mixers IoT products: Sales of smart meters, internet- connected thermostats and air-conditioning controls increase on soaring energy prices Smart ener
Slide 25: Asia Pacific
Asia Pacific Revenue by Product Line (US$ million) • Revenue increased 27.9% to US$152.2 million, 13.1% of Group revenue ELPs TEL 41.9 13.9 • Growth in all three product lines (+6.9%) (+4.5%) • ELPs revenue rose 6.9% to US$41.9 million, with higher sales in Australia and Japan offsetting a decline i
Slide 26: Asia Pacific (continued)
Asia Pacific (continued) • TEL products revenue increased 4.5% to US$13.9 million as higher sales in Japan, Hong Kong and India offset lower sales in Australia Japan: Orders for CareLine increased Hong Kong: Higher sales of IADs India: Orders for residential phones increased Australia: Sales
Slide 27: Asia Pacific (continued)
Asia Pacific (continued) • CMS revenue increased 45.0% to US$96.4 million • Good performances across all major categories Professional audio equipment: Higher sales of DJ equipment offset lower sales of USB streaming microphones Medical and health products: Orders for diagnostic ultrasound syste
Slide 28: Other Regions
Other Regions Revenue by Product Line (US$ million) • Revenue fell 3.3% to US$11.7 million, 1.0% ELPs of Group revenue 6.4 (+10.3%) • Lower sales of TEL products and CMS • ELPs revenue increased 10.3% to US$6.4 million. Higher sales in Latin America and Africa offset lower sales in Middle East • TEL
Slide 29: Outlook
vtech Outlook >> > >> > INNOVATION BEYOND TECHNOLOGY 29
Slide 30: Outlook
Outlook • Complex and volatile operating environment Persistently high energy costs and high inflation Rising interest rates, with no sign of them peaking in near term Sharp fall in economic growth, with consumers more price sensitive and reducing discretionary purchases High channel invento
Slide 31: Outlook
Outlook • Revised outlook on dramatic change in operating environment Group revenue expected to decline year-on-year Gross profit margin anticipated to be stable Increased focus on managing inventory, with higher advertising and promotional spend Tightening cost control Continue to invest
Slide 32: Outlook: ELPs
Outlook ELPs • Full year revenue expected to decline Retailers in North America and Europe tightening inventory management and cautious about placing new orders Well-planned advertising and promotions in place to ensure good sell-through Good momentum expected to continue in Canada, Australia,
Slide 33: Outlook: TEL products
Outlook TEL products • Full year revenue projected to decrease year- on-year, with sales in 2H expected to improve New baby monitors with AI features and revamped hotel phones will maintain good momentum in these product lines Sales of commercial phones expected to recover as new products hit th
Slide 34: Outlook: CMS
Outlook CMS • Full year revenue projected to be stable 2H sales expected to slow as certain critical components supply remains tight and customers cut inventory Sales of hearables for full year expected to decline sharply on lower demand for commercial and mobile headsets Full year growth fore
Slide 35: Q&A
vtech Q&A >> > >> > INNOVATION BEYOND TECHNOLOGY 35
Slide 36: Thank You
vtech Thank You >> > >> > INNOVATION BEYOND TECHNOLOGY 36