Advantech — Interim / Quarterly Report 2020

Sep 4, 2020

Advantech 2020 2H Analyst Meeting

August 2020

Safe Harbor Notice

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 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

2Q20 & 1H20 Financial Result

NT$ mn	1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20	1H20 YoY
Net Sales	11,355 **12,645 12,360 12,366 **				12,301 13,976 14,382 13,486				11,272	14,018	25,290 -4%
QoQ%	-3% 11% -2% 0%				-1% 14% 3% -6%				-16%	24%
YoY%	13% 11% 10% 5%				8% 11% 16% 9%				-8%	0%
Gross Profit	4,338 4,792 4,760 4,772				4,724 5,410 5,697 5,268				4,395	5,766	10,161 0%
Gross Margins%	38.2% 37.9% 38.5% 38.6%				38.4% 38.7% 39.6% 39.1%				39.0%	41.1%	40.2%
OperatingExpense	2,696 2,851 2,858 2,799				2,872 3,078 3,064 2,858				2,742	2,925	5,666 -5%
Operating Profit	1,643 1,941 1,902 1,974				1,852 2,333 2,633 2,410				1,654	2,841	4,495 8%
Operating Margin%	14.5% 15.4% 15.4% 16.0%				15.1% 16.7% 18.3% 17.9%				14.7%	20.3%	17.8%
No-operatingIncome	99 87 265 76				196 89 86 -297				-33	118	85 -70%
Pretax Profit	1,741 2,029 2,167 2,050				2,048 2,422 2,718 2,113				1,621	2,959	4,580 2%
Tax Expenses	374 434 458 412				432 513 561 409				340	621	961 2%
Effective Tax Rate	21.5% 21.4% 21.1% 20.1%				21.1% 21.2% 20.6% 19.4%				21.0%	21.0%	21.0%
Net Income	1,363 1,584 1,710 1,633				1,613 1,894 2,140 1,700				1,295	2,308	3,602 3%
QoQ%	-17% 16% 8% -5%				-1% 17% 13% -21%				-24%	78%
YoY%	10% 10% 9% 0%				18% 20% 25% 4%				-20%	22%
Adjusted EPS(NT$)	1.78 2.07 2.23 2.13				2.10 2.46 2.78 2.21				*1.68	*2.99	4.67* 2%**

 In non-operating side, Advantech booked NT$26mn FX loss and a NT$13mn disposal loss of fixed asset 2Q20.

 * The reported EPS of 1Q20 and 2Q20 were NT$1.85 and NT$3.29, respectively. 1H20 reported EPS was NT$5.14

3

1H20 Sales By Region

		USD$M			1H20		1H19	1H19		YoY %	YoY %		Rev %
		North America			241			249		-3%			29%
		Europe			141			155		-9%			17%
		China			194			187		+4%			23%
		North Asia			91			88		+3%			11%
		Taiwan			58			51		+14%			7%
		Asia & Intercon			67			71		-5%			8%
		Others			50			46		+9%			6%
		Total			841			847		-0.1%			100%
		North America				China					Asia &	InterCon
	•	Industrial IoT, EIOT, Healthcare and Logistic		•	EIOT and IIOT segment performed strongly					AAU/NZ:	$7.7M		GR%:	+13%
	•	business performed resilient in 2Q20. ODM customers started postposing their shipment schedule in 2Q20.		•	rebound in 2Q20. Hospitality segment still experienced significantly declining sentiment in 2Q20.					ASEAN: India	$19.2M $5.1M		GR%: GR%:	+11% -37%
										Russia	$6.4M		GR%:	-19%
		Europe				North	Asia			LATAM	$9.4M		GR%:	+33%
	•	The decline was across the board but logistic sector performed solid in 2Q20.		AJP: ATJ*:		$18.4M $37.8M	GR%: GR%:	-11% -18%		ME&A	$18.1M		GR%:	-19%
				AKR :		$35.0M	GR%:	+15%

4

1H20 Performance B SBG y

	US$ mn	US$ mn	Revenues YoY Rev. %	Gross Margin Range	Operating Profit OP Margin
	Industrial IOT		276 2% 33%	48~53%	56 20.2%
	Embedded IOT		211 -3% 25%	34~39%	31 14.6%
	Allied DMS	Applied Computing	111 1% 13%	26~36%	13 11.9%
		*Cloud IOT	81 -6% 10%	38~40%	14 16.0%
	Service	IOT	66 -8% 8%	38~43%	5 7.4%
	AGS & APS		96 -2% 11%	23~28%	12 12.9%
	Other unallocated profit (expenses)				19
	Total		841 -0.1% 100%		150 17.8%

• *Networks & Communications Group was renamed as Cloud IoT Group effectively in October 2019.

• Industrial IOT segment was benefiting from the rebound in China market in 2Q20 and also performed solid in US market in 2Q20.

• Medical sectors performed solid in 2Q20, benefiting EIOT and Applied Computing Group’s sentiment.

• Service IOT’s business suffered from the world-wide lockdowns in hospitality segment.

5

Workin Ca ital and Balance Sheet g p

NT$ mn	NT$ mn	1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20
Cash Cycle
Inventory		6,818	7,174	7,600	7,558	8,179	8,446	8,089	7,783	9,093	9,695
Account receivable		7,797	8,358	8,346	8,351	8,683	9,209	9,526	8,832	8,012	9,617
Accountpayable		5,376	6,251	6,248	5,811	5,756	6,519	4,981	4,799	5,291	5,455
	IN turnover	85	81	88	91	95	88	87	88	112	104
	AR turnover	62	60	61	61	64	60	60	60	65	62
	AP turnover	70	72	75	70	69	69	52	53	70	60
	CCC	77	69	75	83	90	79	95	94	106	106
BS
Cash & Cash Equivalents		8,829	10,456	7,178	8,884	9,304	11,446	7,103	10,061	11,013	12,166
Total asset		42,324	45,345	42,286	43,940	46,864	49,654	45,391	47,216	49,007	52,444
ST debt		36	25	18	97	633	524	502	458	493	484
LT debt		81	81	81	46	439	387	334	278	290	198
Total equity		29,411	26,475	28,108	29,543	31,642	28,994	30,971	32,731	28,640	30,904
Capex		(158)	(130)	(246)	(157)	(189)	(214)	(229)	(329)	(213)	(346)
D&A		187	177	203	148	275	254	287	167	265	219
Total Investment CF		(609)	(476)	(31)	(666)	(814)	(176)	(342)	(475)	(730)	250

 Inventory turnover days still go above company historical average, due to over-build certain key components and customers starting postposing their shipment schedule in 2Q20.

6

3Q20 Guidance

Based on the exchange rate assumption of US$1 to NT$29.5 , managements expect the 3Q20 guidance as below

Items 3Q20 Estimation Consolidated Revenue US$ 440 ~ 460 M

Gross Margin Operating Margin

38.5% ~ 40.5% 15.5% ~ 17.5%