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Advantech — Call Transcript 2020
May 13, 2020
52053_rns_2020-05-13_a3a14be8-4c83-4819-99b4-e19f616f347e.pdf
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Advantech 1Q20 Result Earnings Call
May 2020
Safe Harbor Notice
==> picture [720 x 10] intentionally omitted <==
This presentation contains forward-looking statements and is subject to risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements.
The projections should not be interpreted as legally binding commitments, but rather as flexible information subject to change occasionally.
2
1Q20 Financial Result
| NT$ mn | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | 1Q20 |
|---|---|---|---|---|---|---|---|---|---|
| Net Sales | 11,355 12,645 12,360 12,366 |
12,301 13,976 14,382 13,486 |
11,272 | ||||||
| QoQ% | -3% 11% -2% 0% |
-1% 14% 3% -6% |
-16% | ||||||
| YoY% | 13% 11% 10% 5% |
8% 11% 16% 9% |
-8% | ||||||
| Gross Profit | 4,338 4,792 4,760 4,772 |
4,724 5,410 5,697 5,268 |
4,395 | ||||||
| Gross Margins% | 38.2% 37.9% 38.5% 38.6% |
38.4% 38.7% 39.6% 39.1% |
39.0% | ||||||
| OperatingExpense | 2,696 2,851 2,858 2,799 |
2,866 3,078 3,064 2,858 |
2,742 | ||||||
| Operating Profit | 1,643 1,941 1,902 1,974 |
1,858 2,333 2,633 2,410 |
1,654 | ||||||
| Operating Margin% | 14.5% 15.4% 15.4% 16.0% |
15.1% 16.7% 18.3% 17.9% |
14.7% | ||||||
| No-operatingIncome | 99 87 265 76 |
196 89 86 -297 |
-39 | ||||||
| Pretax Profit | 1,741 2,029 2,167 2,050 |
2,055 2,422 2,718 2,113 |
1,621 | ||||||
| Tax Expenses | 374 434 458 412 |
432 513 561 409 |
340 | ||||||
| Effective Tax Rate | 21.5% 21.4% 21.1% 20.1% |
21.0% 21.2% 20.6% 19.4% |
21.0% | ||||||
| Net Income | 1,363 1,584 1,710 1,633 |
1,617 1,894 2,140 1,700 |
1,295 | ||||||
| QoQ% | -17% 16% 8% -5% |
-1% 17% 13% -21% |
-24% | ||||||
| YoY% | 10% 10% 7% 0% |
19% 20% 25% 4% |
-20% | ||||||
| EPS(NT$) | 1.95 2.27 2.45 2.34 |
2.31 2.71 3.06 2.43 |
1.85 |
In non-operating side, Advantech booked NT$33mn investment loss in 1Q20, v.s. a fixed asset disposal gain and investment profit in 1Q19.
3
1Q20 Sales By Region
| USD$M | 1Q20 | 1Q19 | 1Q19 | YoY % | YoY % | Rev % | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| North America | 113 | 118 | -5% | 30% | |||||||||
| Europe | 70 | 77 | -10% | 19% | |||||||||
| China | 68 | 84 | -20% | 18% | |||||||||
| North Asia | 41 | 40 | +3% | 11% | |||||||||
| Taiwan | 30 | 23 | +32% | 8% | |||||||||
| Asia & Intercon | 32 | 36 | -10% | 9% | |||||||||
| Others | 22 | 22 | -2% | 6% | |||||||||
| Total | 375 | 400 | -6% | 100% | |||||||||
| North America | China | Asia & | InterCon | ||||||||||
| • | Industrial IoT, Healthcare and Logistic | • | Most segments dropped significantly YoY, | AAU/NZ: | $3.2M | GR%: | -2.8% | ||||||
| • | business performed resilient in 1Q20. Embedded Biz dropped single digit YoY in 1Q20. |
• | due to Factory shutdown and logistic constrain in 1Q20. Embedded IoT segment still reported YoY |
ASEAN: India |
$8.7M $3.3M |
GR%: GR%: |
+10.3% -26.7% |
||||||
| growth in 1Q20. | Russia | $2.6M | GR%: | -38.0% | |||||||||
| Europe | North | Asia | LATAM | $2.9M | GR%: | +7.4% | |||||||
| • | The decline was across the board but logistic sector performed solid in 1Q20. |
AJP: $8.3M ATJ*: $19.2M |
GR%: GR%: |
-8.3% | ME&A | $11.3M | GR%: | -10.3% | |||||
| AKR : $15.4M |
GR%: | +2.4% |
4
1Q20 Performance B SBG y
| US$ mn | US$ mn | Revenues YoY Rev. % |
Gross Margin Range |
Operating Profit OP Margin |
|
|---|---|---|---|---|---|
| Industrial IOT | 115 -9% 31% |
48~53% | 21 18.3% |
||
| Embedded IOT | 99 -2% 26% |
33~38% | 13 12.9% |
||
| Allied DMS |
Applied Computing | 52 -6% 14% |
25~35% | 6 11.3% |
|
| *Cloud IOT | 35 -17% 9% |
38~42% | 5 14.7% |
||
| Service | IOT | 33 -12% 9% |
38~43% | 2 6.3% |
|
| AGS & APS | 41 -12% 11% |
23~28% | 5 12.2% |
||
| Other unallocated profit (expenses) | 3 | ||||
| Total | 375 -6% 100% |
55 14.7% |
-
*Networks & Communications Group was renamed as Cloud IoT Group effectively in October 2019.
-
Embedded IOT and Applied Computing segments performed relative stable.
-
Other product segments experienced component shortage, including casing, power supply, cable and connectors in 1Q20. We expect the component supply situation should improve after mid of May.
5
Working Capital and Balance Sheet
| NT$ mn | NT$ mn | 3Q17 | 4Q17 | 1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | 1Q20 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash Cycle | |||||||||||||
| Inventory | 6,587 | 6,242 | 6,818 | 7,174 | 7,600 | 7,558 | 8,179 | 8,446 | 8,089 | 7,783 | 9,093 | ||
| Account receivable | 7,534 | 7,866 | 7,797 | 8,358 | 8,346 | 8,351 | 8,683 | 9,209 | 9,526 | 8,832 | 8,012 | ||
| Accountpayable | 5,173 | 5,281 | 5,376 | 6,251 | 6,248 | 5,811 | 5,756 | 6,519 | 4,981 | 4,799 | 5,291 | ||
| IN turnover | 84 | 81 | 85 | 81 | 88 | 91 | 95 | 88 | 87 | 88 | 112 | ||
| AR turnover | 61 | 61 | 62 | 60 | 61 | 61 | 64 | 60 | 60 | 60 | 65 | ||
| AP turnover | 69 | 67 | 70 | 72 | 75 | 70 | 69 | 69 | 52 | 53 | 70 | ||
| CCC | 76 | 75 | 77 | 69 | 75 | 83 | 90 | 79 | 95 | 94 | 106 | ||
| BS | |||||||||||||
| Cash & Cash Equivalents | 6,967 | 8,541 | 8,829 | 10,456 | 7,178 | 8,884 | 9,304 | 11,446 | 7,103 | 10,061 | 11,021 | ||
| Total asset | 38,797 257 |
40,704 8 |
42,324 36 |
45,345 25 |
42,286 18 |
43,940 97 |
46,864 633 |
49,654 524 |
45,391 502 |
47,216 458 |
49,007 487 |
||
| ST debt | |||||||||||||
| LT debt | 106 | 114 | 81 | 81 | 81 | 46 | 439 | 387 | 334 | 278 | 290 | ||
| Total equity | 26,171 | 27,760 | 29,411 | 26,475 | 28,108 | 29,543 | 31,642 | 28,994 | 30,971 | 32,731 | 28,640 | ||
| Capex | (170) | (220) | (158) | (130) | (246) | (157) | (189) | (214) | (229) | (329) | (213) | ||
| D&A | 196 | 162 | 187 | 177 | 203 | 148 | 274 | 254 | 287 | 167 | 265 | ||
| Total Investment CF | 3,064 | 1,337 | (609) | (476) | (31) | (666) | (814) | (176) | (342) | (475) | (730) |
The factory shutdown in February and logistic control afterword led an increase of inventory days in 1Q20. Advantech expect the overall cash conversion cycle will go back to normal level in 2Q20
6
Global WFH & RBU Operational Status Update-1/2
Global WFH Status Update
| Region | Great China US Europe North Asia ASEAN/ Aintercon |
|---|---|
| Working Status |
Normal Partial WFH Partial WFH Partial WFH Partial WFH |
| Special Remark |
o The offices in China, Taiwan and Korea stay at normal operation. Other regional offices keepwork-from-homes. o Only few functionality operates upon special approvals, includingappeal essential servicesfor warehouse, CTOS operations, customers services as well (FAE) |
7
Global WFH & RBU Operational Status Update-2/2
Regional Operation Status
| Regional Operation Status | Regional Operation Status | Regional Operation Status | Regional Operation Status | Regional Operation Status | Regional Operation Status | Regional Operation Status | Regional Operation Status | Regional Operation Status |
|---|---|---|---|---|---|---|---|---|
| Update: 4/28/2020 |
||||||||
| Region | Great China | US | Europe | Japan | ||||
| Location | Kunshan | Taipei | Milpitas | Ottawa | Eindhoven | Warsaw | Munich | Fukuoka |
| Operation | Normal | Normal | Normal | Normal | Normal | Normal | Normal | Normal |
| Available Capacity Output % |
100% | 120% | 75-85% | 80% | 95-110% | 95-110% | 95-110% | 100% |
| Shipping Status |
• Most region remains normal • India shipping closed due to lockdown policy until May 3rd |
o Globally, there are three Advantech employee confirmed positively of COVID-19 so far. Two are based in Brazil and One is based in UK. One is totally recovered and two are getting better now.
8
2Q20 Guidance
Based on the exchange rate assumption of US$1 to NT$30.0 , managements expect the 2Q20 guidance as below
Items 2Q20 Estimation Consolidated Revenue US$ 450M ~ 470M Gross Margin 37.0% ~ 39.0% Operating Margin 16.5% ~ 18.5%