Slide 1: Half Year Results for the period ended 28 February 2023
Half Year Results for the period ended 28 February 2023 April 2023
Slide 2: Disclaimer
The content of this document (the “Presentation”) has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 (“FSMA”), as amended. Reliance on this document for the purpose of engaging in any investment activity may expose an individual or organis
Slide 3: Agenda
Agenda Introduction and Highlights Operational Review Financial Review Growth Strategy Tim Carroll Sally McKone Chief Executive Officer Chief Financial Officer Summary and Outlook 3
Slide 4: Focusrite Plc: A global music and audio products Group
Focusrite Plc: A global music and audio products Group CONTENT CREATION: 78% of revenue AUDIO REPRODUCTION: 22% of revenue • Focusrite: audio recording equipment • Martin Audio: live and installed sound, acquired December 2019 • Focusrite Pro: audio recording and broadcasting equipment for commercia
Slide 5: Summary for the six months ended February 2023
Summary for the six months ended 28 February 2023 • Benefits of diversification and solid portfolio businesses is highlighted in tough macro economic environment o Revenue reflecting portfolio strength with Audio Reproduction up 50.7% driven by return of live music and Content Creation down 16.1% o
Slide 6: Content Creation Growth by Brand
Content Creation Growth by Brand FY23/22 FY23/22 HY23 HY22 • Focusrite & Novation: Growth impacted by Reported OCC1 FY22 £m £m £m • Higher global channel stock levels going into the Growth growth year • Macroeconomic challenges leading to weaker Focusrite and Pro 40.1 54.9 -27.1% -35.0% 97.2 demand
Slide 7: Content Creation: Revenue impacted by stock levels in the sales channels
Content Creation: Revenue impacted by stock levels in the sales channels Period end months of Less than half a Approx 1.5 months Steady at 1.5 months Increases to approx. 5 Decrease to approx 4 stock in the channel month months months Demand and supply First lockdowns Ongoing lockdowns Supply begins
Slide 8: Holding market share in challenging markets
Holding market share in challenging markets • Global registrations relate to end user sales of our Content Creation products and are our direct monitor of external demand • Global registrations during the key November and December months in this half year • up 22% compared to pre pandemic (FY19) – a
Slide 9: Content Creation Portfolio retaining high market share
Content Creation Portfolio retaining high market share • Thomann: Largest Musical retailer across EMEA : Focusrite interfaces & ADAM monitors consistently top performers in each category Thomann top 10: audio interfaces • Sweetwater: Largest online retailer of musical instruments in the United State
Slide 10: Award Winning New products
SOS: Best Keyboard/synth SOS: Best Microphone Preamp Award Winning New products • Investment in R&D is at the heart of all SOS: Best Monitor SOS: Best performance controller our brands • This half year we invested 8.3% of revenue in our innovation teams across the Group, resulting in 21 new products
Slide 11: Audio Reproduction
Audio Reproduction FY23/22 FY23/22 HY23 HY22 FY22 Reported OCC1 £m £m £m Growth growth • Market growth Martin, Linea and 18.8 12.5 50.7% 25.3% 31.9 • Strong return of live events globally Optimal • Continued growth in Installed Sound • New product introductions: Direct result of keeping Martin fully
Slide 12: Live Events are Back!
Live Events are Back! First half has seen robust bookings and revenue for commercial installations as well as deployment of Martin/Linea solutions across many of the world's biggest festivals and tours 12
Slide 13: Acquisition: Sonnox
Acquisition: Sonnox • Industry renowned developer of software tools for audio professionals • Acquired for £7.2m consideration (net of cash acquired of £1.9m) in December 2022 • Earnings enhancing in current year – Revenue £2.4m in year to March 2022 • Developer team will remain in Oxford complement
Slide 14: Regional revenue performance
HY23 HY22 FY22 Regional revenue performance HY23/22 HY23/22 £m £m growth OCC1 growth £m North America 36.3 39.8 -8.7% -24.6% 74.5 Europe, Middle East and North CC -15.3% Focusrite/Novation down due to Africa 36.6 35.4 3.4% 0.8% 70.1 America channel stock & softer demand Offset by Sequential and ADAM
Slide 15: Financial overview
Financial overview • Group revenue down -7.2%, still 73% up over pre pandemic (HY20) • Gross margin at 47.1% is higher than HY22 and H2 FY22, with some freight benefits invested in promotions as planned • Adjusted EBITDA1 down to £18.1m from £22.2m in HY22 due to lower sales volumes • Adjusted free
Slide 16: Income Statement
Income Statement HY23 HY22 FY22 £m £m £m • Revenue -7.2% (organic constant currency -19.0%) Revenue 86.2 92.9 183.7 Cost of sales (45.6) (49.6) (100.5) • Gross margin 47.1% (HY22: 46.6%) Gross profit 40.6 43.3 83.3 Operating expenses before adjusting (26.4) (24.2) (48.6) items • Freight costs back t
Slide 17: Gross Margin
Gross Margin o Product margin down 1.4% points as cost increases from FY22 are partially offset by sales price increases o Freight costs down by 4.1% of sales, back to pre pandemic levels o 1.3% points reinvested in promotions over the first half in a competitive Nov/Dec holiday season o Negative 0.
Slide 18: Balance Sheet
Balance Sheet HY23 HY22 FY22 £m £m £m • Intangible fixed assets Intangible assets 84.3 59.7 76.6 • Acquisitions: £6.5m increase from Linea, £4.5m for Tangible assets 10.8 6.5 10.9 Oberheim, £5.5m from Sonnox Total non current assets 95.1 66.2 87.5 • Investment: £4.3m of R&D and £1.1m of licences Inv
Slide 19: Cash flow
HY23 HY22 FY22 Cash flow £m £m £m EBITDA 18.1 22.2 41.7 Non cash items (1.9) (0.9) 0.2 • Adjusted Free cash flow1 as a % of sales -2.7% of revenue Movement in working capital (10.9) (10.1) (26.8) • Long term average 10-12% Operating cash flow 5.3 11.3 15.0 Interest paid (0.6) 0.2 (0.3) • Rebuild of
Slide 20: Ongoing challenges have been well managed
Ongoing challenges have been well managed • China • Like many companies we are dependent upon China for raw materials and much of our manufacturing • We monitor the ongoing geopolitical situation and where possible plan to mitigate with supply chains and, albeit limited, options regarding contract m
Slide 21: Evolving our Environmental Commitment
Evolving our Environmental Commitment o Linking Environmental Benefits to Sales o We have linked Tree Planting to the wood consumption in our products across the group o Now as a minimum, we are replacing 10x more wood back into forests than we consume o To date, we have planted more than 70,000 new
Slide 22: Our ongoing Commitment to Community
Our ongoing Commitment to Community o Linking Community Benefits to Strategy o We have worked with the Inter Development Bank to donate over 4,000 electronic instruments to students in Colombia as part of a programme to start students with a career in the music industry o We continue to work with ed
Slide 23: Focusrite Growth Strategy
Focusrite Growth Strategy Create a We embrace the diverse foundations of the • Office upgrades for both Focusrite Great Place world of audio and nurture our talent to build and Martin to Work a culture of equity and inclusion • First Groupwide eNPS survey Grow the We invest in R&D to ensure our prod
Slide 24: Summary and Outlook
Summary and Outlook o Focusrite’s diversification strategy has helped provide increased resilience in the face of global and industry headwinds o Successful integration of Linea Research and Sonnox, expanding portfolio to 11 brands o Content Creation division impacted by softer markets and surplus c
Slide 25: Additional Information
Additional Information April 2023 25
Slide 26: Content Creation
Content Creation Aspiring Creator Passionate Serious Producer Music Master Facility Content Creation Market Maker Market size £450m - £500m £625m - £675m £250m - £275m £200m - £250m £300m - £350m Customer use Creatives wanting Artists and music Constantly Produces music Post production fast results
Slide 27: Audio Reproduction Market
Audio Reproduction Less than 15 metres 15 – 30 metres 30 + metres Market Content Creation Market size £960m - £1,200m £960m - £1,200m £250m - £275m Point source portable and Smaller line arrays and Large scale line arrays on wall speakers constant curvature arrays Customer use Intimate gigs and smal
Slide 28: Product sectors: Focusrite
Product sectors: Focusrite Focusrite Scarlett: Mass market interface. Home user $100 to $500 Clarett: Intermediate / Professional user $400 to $1,200 Vocaster: Podcasting/streaming solutions: $149-$399 Focusrite Pro RedNet: Enterprise, Live, Broadcast, Education. Networked Audio over IP $3,000 upwar
Slide 29: Product sectors: Novation including Ampify
Product sectors: Novation including Ampify Novation CONTROLLERS Physical interfaces to control music creation software Grid controllers: Launchpad - $100 to $300. Keyboard controllers: Launchkey - $100 to $250. STANDALONE Function on their own as sound generating devices Grid: Circuit - $330. Keyboa
Slide 30: Product sectors: ADAM Audio
Product sectors: ADAM Audio T Series AX Series S Series Entry level studio monitor: Mid level studio monitor: High end studio monitor: $1,750- $400-$500 per pair $700-$2,000 per pair $20,000 per unit Subwoofers Headphones $700-$8,000 per unit SP-5 headphones: $500 30
Slide 31: Product sectors: Sequential/Oberheim
Product sectors: Sequential/Oberheim
Slide 32: Product Sectors: Sonnox
Product Sectors: Sonnox: Sonnox Focusrite Group © Sonnox Fraunhofer codec MP3 status FREQUENCY DETECT REMOVAL
Slide 33: Product sectors: Martin Audio
Product sectors: Martin Audio TH Series Small Sound Systems Medium Format Systems Large Format Systems From For up to 250 people. From From 250-1500 people: prices 1500 to 10,000+ people. Prices $500 from $2,000 from $40,000 33
Slide 34: Product sectors: Optimal Audio
Product sectors: Optimal Audio ZonePad wall controllers Zone processors SmartAmp DSP amplifiers Up ceiling speakers Sub sub-woofers Cuboid on-wall speakers Systems start from £2,000 34
Slide 35: Product sectors: Linea Research
Product sectors: Linea Research M Series Touring amplifiers- £4,500 - £6,400 C Series Installation amplifiers- £4,200 - £6,000 ASC Loudspeaker and System Processor - £1,650 XiB installation amplifiers - £1,650 35
Slide 36: Restated Adjusted EPS
Restated Adjusted EPS • Tax on adjusted items has been HY23 HY22 FY22 HY22 FY22 Reported Restated Restated Prior Prior restated to include the deferred tax £'000 £'000 £'000 £'000 £'000 credit due to the amortisation of acquired intangibles, which had not Reported profit after tax 8,449 13,453 24,77
Slide 37: Foreign exchange
Foreign exchange Exchange rates HY23 HY22 • Natural hedge for USD • US and ROW revenue. Average US$:£ 1.19 1.35 • Total c50% of revenue but €:£ 1.14 1.18 almost all cost of sales so minor net profit inflow Average rate of forward contracts €:£ 1.17 1.13 Weighted average applicable rate • Euro hedged
Slide 38: Removing Barriers to Creativity
Removing Barriers to Creativity 38