Advantech — Investor Presentation 2020

Mar 11, 2020

Advantech 2020 1H Analyst Meeting

March 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

4Q19 & FY2019 Result Summary

NT$ mn	1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19	FY2019 YoY
Net Sales QoQ% YoY%	11,355 12,645 -3% 11% 13% 11%		12,360 -2% 10%	12,366 0% 5%	12,301 13,976 -1% 14% 8% 11%		14,382 3% 16%	13,486 -6% 9%	54,145 11%
Gross Profit Gross Margins%	4,338 4,792 38.2% 37.9%		4,760 38.5%	4,772 38.6%	4,724 5,410 38.4% 38.7%		5,697 39.6%	5,268 39.1%	21,099 13% 39.0%
OperatingExpense	2,696 2,851		2,858	2,795	2,866 3,078		3,064	2,847	11,854 6%
Operating Profit Operating Margin%	1,643 1,941 14.5% 15.4%		1,902 15.4%	1,977 16.0%	1,858 2,333 15.1% 16.7%		2,633 18.3%	2,421 18.0%	9,245 24% 17.1%
No-operatingIncome	99 87		265	76	196 89		86	-309	63 -88%
Pretax Profit	1,741 2,029		2,167	2,053	2,055 2,422		2,718	2,113	9,308 16%
Tax Expenses	374 434		458	412	432 513		561	409	1,915 14%
Effective Tax Rate	21.5% 21.4%		21.1%	20.1%	21.0% 21.2%		20.6%	19.4%	20.6%
Net Income	1,363 1,584		1,710	1,635	1,617 1,894		2,140	1,700	7,351 17%
YoY%	10% -8%		7%	0%	19% 20%		25%	4%
EPS(NT$)	1.95 2.27		2.45	2.34	2.31 2.71		3.06	2.43	10.51 17%

• Advantech booked NT$77mn FX loss and NT$386mn impairment loss in 4Q19.

• Effective tax was 20.6% in 2019.

Local Sales: US 1,756.0M, +9%

FY2019 Performance by Region

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US$M Y2018 Y2019 GR% Rev. Portion
North America 444.8 507.4 +14% 29%
Europe 305.7 300.8 -2% 17%
China 400.4 409.4 +2% 23%
North Asia 108.3 188.7 +74% 11%
Taiwan 108.0 100.5 -7% 6%
Asia & InterCon 122.9 141.9 +15% 8%
Others 127.8 107.3 -16% 6%
Total 1,617.9 1,756.0 +9% 100%
Others North Asia Asia & InterCon
Asia 6%
& Intercon AJP: 42.1M GR%: -2.6%
AAU/NZ: 13.6M GR%: +16.5%
8% North
Taiwan ATJ: 82.4M GR%:
America ASEAN: 36.3M GR%: +19.3%
6%
29% AKR : 64.1M GR%: -1.4%
India 14.5M GR%: -5.8%
North Asia Russia 15.2M GR%: +0.4%
11%
LATAM 15.4M GR%: -6.1%
ME&A 45.2M GR%: +35.1%
Europe ROW 1.7M GR%: +285.6%
China
17%
23%
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FY2019 Performance By SBG

	US$ mn	US$ mn	Revenues YoY Rev. %	Gross Margin Range	Operating Profit OP Margin
	Industrial IOT		556 0% 32%	48~53%	130 23.3%
	Embedded IOT		442 7% 25%	33~38%	76 17.2%
	Allied DMS	Applied Computing	215 63% 12%	25~30%	33 15.2%
		*Cloud IOT	198 20% 11%	35~40%	35 17.5%
	Service	IOT	148 1% 9%	38~43%	13 8.7%
	AGS & APS		197 -6% 11%	23~28%	27 13.9%
	Other unallocated expenses				-14
	Total		1,756 9% 100%		300 17.1%

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

• The increased operating margin in 2019 was driven from 1) declining raw material price in 2019; 2) improved operating efficiency.

• Applied Computing Group (ACG) consolidated Advantech Technologies Japan (ATJ) business since February 2019, resulting a strong growth. Excluding ATJ contribution, ACG reported flattish growth in 2019.

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Workin Ca ital and Balance Sheet g p

NT$ mn	NT$ mn	2Q17	3Q17	4Q17	1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19
Cash Cycle
Inventory		5,969	6,587	6,242	6,818	7,174	7,600	7,558	8,179	8,446	8,089	7,783
Account receivable		7,655	7,534	7,866	7,797	8,358	8,346	8,351	8,683	9,209	9,526	8,832
Accountpayable		4,194	5,173	5,281	5,376	6,251	6,248	5,811	5,756	6,519	4,981	4,799
	IN turnover	76	84	81	85	81	88	91	95	88	87	88
	AR turnover	61	61	61	62	60	61	61	64	60	60	60
	AP turnover	54	69	67	70	72	75	70	69	69	52	53
	CCC	83	76	75	77	69	75	83	90	79	95	94
BS
Cash & Cash Equivalents		8,943	6,967	8,541	8,829	10,456	7,178	8,884	9,304	11,446	7,103	10,070
Total asset		40,533	38,797	40,704	42,324	45,345	42,286	43,937	46,864	49,654	45,391	47,216
ST debt		386	257	8	36	25	18	97	633	524	502	458
LT debt		110	106	114	81	81	81	46	439	387	334	278
Total equity		24,538	26,171	27,760	29,411	26,475	28,108	29,541	31,642	28,994	30,971	32,731
Capex		(105)	(170)	(220)	(158)	(130)	(246)	(157)	(189)	(214)	(229)	(329)
D&A		197	196	162	187	177	203	126	274	254	287	203
Total Investment CF		(1,954)	3,064	1,337	(609)	(476)	(31)	(654)	(814)	(176)	(342)	(475)

 The total CAPEX in 2019 was NT$962mn

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FY2019 Dividend Per Share – NT$ 7.8 Cash +NT$1 Stock

 Cash Dividend Payout Ratio: ~75% of EPS

• When the firm achieves double digit top-line and bottom-line growth in the year, the board would propose to pay additional stock dividend.

	2014	2015	2016	2017	2018	2019
Cash Payout Ratio	76.9%	74.3%	81.5%	74.7%	75.3%
Dividend (NT$/share)	6.0	6.0	7.3	6.6	6.8
Cash per Share	6.0	6.0	6.3	6.6	6.8
Stock per Share	0.0	0.0	1.0	0.0	0.0
EPS (NT$)	7.09	7.35	8.15	8.84	9.02

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1Q20 Guidance

Based on the exchange rate assumption of US$1 to NT$30.0 , managements expect the 1Q20 guidance as below

Items 1Q20 Estimation Consolidated Revenue US$365 ~ 375mn Gross Margin 37.0% ~ 39.0% Operating Margin 11.5% ~ 13.5%