HTC — Interim / Quarterly Report 2015

Feb 15, 2016

CHIALIN CHANG, CFO & PRESIDENT OF GLOBAL SALES EDWARD WANG, VP OF FINANCE February 3, 2016

HTC CORPORATION 4Q15 BUSINESS REVIEW

DISCLAIMER STATEMENT

• This presentation and release contain "forward-looking statements" which may include projections of future results of operations, financial condition or business prospects based on our own information and other sources.
• Our actual results of operations, financial condition or business prospects may differ from those expressed or implied in these forward-looking statements for a variety of reasons, including but not limited to market demand, price fluctuations, competition, international economic conditions, supply chain issues, exchange rate fluctuations and other risks and factors beyond our control.
• The forward-looking statements in this release reflect the current belief of HTC as of the date of this release. HTC undertakes no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date.

EXECUTIVE SUMMARY

4Q15 Financial Highlights:

• Revenue of NT\$25.7 billion with gross margin of 13.9%
• Operating loss of NT\$4.1 billion with operating margin of -16.1%
• Net loss after tax of NT\$3.4 billion, or -NT\$4.1 per share

Business Overview

• Revenue and net income saw sequential improvement in Q4.
• HTC Desire series experienced good momentum over the Q4 holiday season, while The HTC One A9 was well received across Asia, the US, and Europe.
• UA HealthBox™, launched with Under Armour, and Vive virtual reality system together garnered more than twenty awards at the Consumer Electronics Show (CES) in January 2016.
• The Vive Unbound developer conference in Beijing in December 2015 has brought together experts from the virtual reality ecosystem and hundreds of Chinese content developers.

REVENUES AND OPERATING PROFIT

GROSS AND OPERATING MARGINS

4Q 2015 P&L (CONSOLIDATED)

NT\$bn	4Q 14	3Q 15	4Q 15
REVENUES	47.9	21.4	25.7
GROSS PROFIT	9.7	3.9	3.6
OPERATING EXPENSE	9.6	8.8	7.7
SALES MKTING.	4.9	3.9	3.5
RESEARCH DEV.	3.8	3.6	3.0
GENERAL ADM.	0.9	1.3	1.2
OPERATING PROFIT	0.1	-4.9	-4.1
NPBT	0.5	-4.5	-3.7
NPAT1	0.5	-4.5	-3.4
GROSS MARGIN (%)	20.4%	18.0%	13.9%
OPERATING MARGIN (%)	0.3%	-23.1%	-16.1%
EPS2 (NT\$)	0.57	-5.41	-4.10

1 Attributable to stockholders of parent company, excluding minority interest. 2 EPS was calculated based on number of outstanding shares at that time.

4Q 2015 BALANCE SHEET (CONSOLIDATED)

Cash¹ TOTAL EQUITY² METRICS³

NT\$bn	Dec 31, 14	Sep 30, 15	Dec 31, 15
TOTAL ASSETS	163.8	136.3	129.4
Cash1	56.1	44.0	39.4
AR	29.1	17.0	18.5
INVENTORY	17.2	20.8	19.1
OTHER ASSETS	61.4	54.5	52.4
TOTAL LIABILITIES	83.5	67.5	64.6
TOTAL EQUITY2	80.3	68.8	64.8
METRICS3
DAYS SALES OUTSTANDING	58	110	74
INVENTORY TURNOVER DAYS	54	126	93
DAYS PAYABLE OUTSTANDING	104	184	122

1. Includes time deposits with original maturities more than 3 months

2. Attributable to stockholders of parent company, excluding minority interest.

3. Financial metrics are calculated based on quarterly numbers, starting from 2Q 2012

HTC CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (UNAUDITED)(In Thousands of New Taiwan Dollars)

	De ber 31 cem	20 15 ,	De ber 31 cem	20 14 ,		De ber 31 cem ,	20 15	De ber 31 cem ,	20 14
	Am t oun	%	Am t oun	%		Am t oun	%	Am t oun	%
AS SE TS					LIA BIL ITI ES AN D E QU ITY
CU RR EN T A SS ET S					CU RR EN T L IAB ILIT IES
Ca sh and sh iva len ts ca equ	\$ 35 346 799 , ,	27	\$ 55 743 558 , ,	34	Fin ial liab iliti at f air val thr h p rof it o r lo \$ nt anc es ue oug ss - cu rre	36 544 ,	\$ -	22 424 ,	-
fair rof Fin ial ets at lue th h p it o r lo nt anc ass va rou g ss - cu rre	493 95 ,	-	544 262 ,	-	No te a nd tra de abl pay es	29 598 385 , ,	23	343 43 803 , ,	27
Av aila ble -fo le f ina nci al a ts - nt r-sa sse cu rre	28 303 9 ,	-	-	-	Oth abl er pay es	24 993 276 , ,	19	945 32 237 , ,	20
De bt i ith ive ark stm ent act et - nt nve s w no m cu rre	2 8, 66	-	7, 918	-	Cu liab iliti nt t rre ax es	163 252 ,	-	210 714 ,	-
Tra de eiv abl t rec es, ne	18, 518 948 ,	14	284 29 140 , ,	18	Pro vis ion t s - cur ren	5, 992 258 ,	5	179 5, 84 1,	3
Oth eiv abl er rec es	466 79 1 ,	1	936 584 ,	-	Oth t lia bili ties er cur ren	763 3, 689 ,	3	134 1, 143 ,	1
Cu nt t ets rre ax ass	212 033 ,	-	274 32 1 ,	-	To tal t lia bili ties cur ren	478 64 473 , ,	50	739 83 258 , ,	51
Inv orie ent s	19, 123 637 ,	15	060 17, 213 ,	11
Pre nts pay me	4, 400 968 ,	4	106 6, 626 ,	4
fo No ent set s h eld le n-c urr as r sa	277 3, 768 ,	3	-	-	NO N-C S UR RE NT LIA BIL ITIE
Oth t fin ial ets er cur ren anc ass	4, 100 290 ,	3	954 334 ,	-	De fer red lia bili ties tax	97 35 1 ,	-	202 932 ,	-
Oth t as set er cur ren s	1 94 61 ,	-	269 99 ,	-	Gu e d sits cei ved nte ara epo re	30 159 ,	-	230 43 ,	-
To tal t as set cur ren s	402 86 439 , ,	67	950 110 286 , ,	67	To tal nt l iab iliti non -cu rre es	510 127 ,	-	162 246 ,	-
NO N-C UR RE NT AS SE TS					T l lia bili ties ota	64 600 988 , ,	50	1 83 504 90 , ,	51
Av aila ble -fo le f ina nci al a ts - ent r-sa sse no n-c urr	7 5	-	93	-
Fin ial d a ets t co st - ent anc ass m eas ure no n-c urr	3 3, 96 151 ,	3	478 2, 586 ,	2
Inv d fo ing uity eth od est nts nte me ac cou r us eq m	23 240 7 ,	-	234 66 1 ,		EQ UIT Y -
Pro lan nd ipm ty, t a ent per p equ	130 15, 432 ,	12	556 23 435 , ,	14
Inv ies est nt p ert t me rop , ne	1, 708 489 ,	1	-	-	Sh ital rdin sh are ca p - o ary are s	8, 318 695 ,	6	8, 349 52 1 ,	5
Inta ible set ng as s	5, 56 1, 444	4	7, 209 29 1 ,	5	Ca ital lus p su rp	15, 505 853 ,	12	687 15, 140 ,	9
De fer red tax set as s	8, 699 322 ,	7	707 8, 452 ,	5	Re tain ed nin ear gs
Re fun dab le d sits epo	1, 580 342 ,	1	740 262 ,	-	Leg al r ese rve	18, 297 655 ,	14	350 18, 149 ,	11
Lon iva ble ter g- m r ece s	1, 488 775 ,	1	813 1, 342 ,	1	Un riat ed nin app rop ear gs	21 782 432 , ,	17	753 41 38 1, ,	25
Pre id p ion st - ent pa ens co no n-c urr	470 79 ,	-	138 109 ,	-	Oth ity er equ	1, 088 415 ,	1	118 1, 062 ,	1
Oth nt a ts er non -cu rre sse	246 4, 767 ,	4	847 9, 917 ,	6	( Tre har asu ry s es	200 955 ) ,	( -	) 3, 750 056 ( ,	2)
To tal nt a ts non -cu rre sse	1 42 953 68 , ,	33	324 53 55 1, ,	33	T l eq uity ota	095 64 792 , ,	50	373 80 333 , ,	49
TO TA L	\$ 083 129 393 , ,	100	\$ 163 838 274 , ,	100	\$ TO TA L	129 393 083 , ,	\$ 100	163 838 274 , ,	100

HTC CORPORATION AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENT (UNAUDITED)(In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)

	Fo he r t	Ye En ars	de d De be r 3 1 ce m
	20 15		20 14
	Am nt ou	%	Am nt ou	%
O P E R A T I N G R E V E N U E S	\$ 12 1, 6 8 4, 23 1	10 0	\$ 18 7, 9 11 20 0 ,	10 0
O P E R A T I N G C O S T S	9 9, 73 1, 12 4	8 2	5 14 7, 15 6, 10	78
G R O S S P R O F I T	21 9 5 3, 10 7 ,	18	5 40 75 5, 0 9 ,	22
O P E R A T I N G E X P E N S E S
Se l l ing d m ket ing an ar	17 45 2, 6 73 ,	15	21 8 3 4, 28 6 ,	12
Ge l a d a dm in istr ive at ne ra n	4, 9 75 9 6 4 ,	4	5, 20 4, 78 8	3
Re h a d de lop nt se arc n ve me	13 72 7, 6 16 ,	11	1 13 0 47 25 , ,	7
To l o ing ta t p era ex p en se s	3 3 6, 15 6, 25	0 3	25 40 0 8 6, 3 ,	22
( L O S S ) P R O F I T F R O M O P E R A T I O N S	( 14 20 3, 14 6 ) ,	( 12 )	0 6 6 8, 77	-
O O G C O S S N N- P E R A T I N I N M E A N D E X P E N E
Ot he inc r om e	9 28 0 3 6 ,	1	8 3 4, 12 4	1
Ot he ins d los r g a an se s	( ) 2, 28 6, 6 5 9	( ) 2	5 0 6, 19 4	-
F ina ts nc e c os	( 8, 12 3 )	-	( 16 9 8 3 ) ,	-
S ha f t he f it o los f a iat d j int ntu re o p ro r s o sso c es an o ve res	( 11 6 48 ) ,	-	( 8, 6 79 )	-
To l n ing inc d e ta t on -op era om e a n xp en se s	( 1, 3 78 3 9 4 ) ,	( 1 )	6 1, 3 14 6 5 ,	1
( L O S S ) P R O F I T B E F O R E I N C O M E T A X	( ) 15 5 8 1, 5 40 ,	( ) 13	1, 9 8 3, 42 6	1
I N C O M E ( B E N E F I T ) T A X	( 48 47 2 ) ,	-	0 5 0 0, 3 8	-
( L O S S ) P R O F I T F O R T H E Y E A R	\$ ( ) 15 5 3 3, 0 6 8 ,	( 13 )	\$ 1, 48 3, 0 46	1
( L O S S ) E A R N I N G S P E R S H A R E
Ba ic s	( \$ ) 18 .79		\$ 1.8 0
D i lut d e	\$ ( ) 18 .79		\$ 1.8 0

HTC CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)(In Thousands of New Taiwan Dollars)

	Fo r th e Y En de d D mb 31 ea rs ece er
		20 15	20 14
CA SH OW S F RO M O G A CT S FL PE RA TIN IVI TIE
( Los s) fit b efo inc e t pro re om ax	\$ (	\$ 15, 58 1, 54 0)	1, 98 3, 42 6
Ad jus s fo tm ent r:
De cia tio pre n e xpe nse		2, 53 9, 04 6	2, 95 2, 89 2
Am iza tio ort n e xpe nse		1, 95 6, 53 3	1, 86 8, 81 7
Imp air los niz ed de eiv ab les nt tra me ses re cog on rec		-	3, 87 5
Fin ts an ce cos		8, 123	16, 98 3
Inte t in res com e	(	41 9, 96 9) (	40 3, 155 )
Div ide nd inc om e	(	35 2, 074 ) (	26 38 1) ,
Co ion of loy sha - b d p sat sts ent mp en co em p ee re ase aym s		55 0, 68 8	26 9, 01 3
Sh of th e lo of oci nd jo int ate ntu are ss ass s a ve res		11, 64 8	8, 67 9
( Ga in) los n d isp l of lan nd uip ert t a nt s o osa pr op y, p eq me	(	5) 8, 38	153 49 3 ,
Tra nsf of lan nd uip rty, t a nt t er pro pe p eq me o e xpe nse s		8, 33 9	-
Ga ins le o f in tm ent on sa ves s	(	7) ( 32	5) 157 99 ,
n f Imp air los ize d o ina nci al a red nt ts at st me s r eco gn sse me asu co		-	37 3, 25 7
Imp air los n-f ina nci al a nt ts me ses on no sse		4, 85 9, 33 6	69 5, 94 5
Ch s in ting nd liab iliti set an ge op era as s a es
De ( inc se) in fina nci al i s h eld fo ad ing nst ent r tr cre ase rea rum		18 1, 17 1 (	77 82 3) ,
De ( inc se) in de eiv ab les tra cre ase rea rec		10, 62 1, 33 6 (	5, 77 2, 98 7)
De in oth eiv ab les cre ase er rec		112 713 ,	1, 55 2, 87 0
( Inc se) de in inv ori ent rea cre ase es	(	3, 85 0, 02 3)	5, 86 4, 80 6
De ( inc se) in nts cre ase rea pre pay me		2, 22 5, 138 (	82 2, 36 2)
De in oth t a ts cre ase er cur ren sse		4, 65 8	25 53 9 ,
De in oth ent set cre ase er no n-c urr as s		2, 66 6, 129	1, 77 9, 56 7
De in nd de ab les not tra cre ase e a pay	(	8) ( 14, 20 4, 95	8) 2, 47 2, 50
De in oth ab les cre ase er pay	(	8) ( 7, 108 60 ,	7) 5, 27 9, 30
Inc ( de ) in p isio rea se cre ase rov ns		( 15 1, 07 9	6) 2, 36 7, 70
Inc in o the lia bili ties ent rea se r c urr		2, 54 6, 62 9	187 00 7 ,
Ca h ( d in ) d fro ion te t s us e g en era m op era s	(	13, 08 3, 31 8)	35 5, 94 5
Inte cei ved t re res		33 4, 30 9	31 1, 26 2
Inte aid t p res	(	8, 123 ) (	16, 98 3)
Inc id e t om ax pa	(	29 5, 35 1) (	99 0, 08 3)
Ne sh d in ting tivi ties t ca use op era ac	(	13, 05 2, 48 3) (	33 9, 85 9)

HTC CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)(In Thousands of New Taiwan Dollars)

	Fo r th e Y En de d D mb 31 ea rs ece er
		20 15	20 14
CA SH FL OW S F RO M INV ES TIN G A CT IVI TIE S
Pu rch of de bt inv wi th ive ark est nts act et ase me no m		( -	7, 91 8)
Pa ire fina nci al a red ent s to ts at st ym ac qu sse me asu co	(	70 0, 24 5) (	43 2, 46 3)
Pro ds fro m d isp l of fin cia l as ed set at c ost cee osa an s m ea sur		32 7	2, 35 8, 135
Pa ire inv d f usi uity eth od ent s to est nts nte ym ac qu me ac cou or ng eq m	(	1) ( 16, 53	6) 15, 83
Pa s fo lan nd uip ent ert t a nt ym r p rop y, p eq me	(	9) ( 98 7, 32	4) 1, 37 2, 93
Pro ds fro m d isp l of lan nd uip ert t a nt cee osa pr op y, p eq me		34 5, 46 4	16, 01 7
efu Inc in r nda ble de its rea se pos	(	1, 31 7, 60 2)	-
De in ref und ab le d osi ts cre ase ep		-	90 154 ,
Pa s fo r in ible ent tan set ym g as s	(	93 68 3) ( ,	24 4, 58 8)
Inc in o the fin cia l as ent set rea se r c urr an s	(	3, 76 5, 33 6)	-
De in oth t fin cia l as set cre ase er cur ren an s		-	2, 43 6, 06 9
Div ide nd eiv ed rec		166 38 ,	26 38 1 ,
Ne sh (us ed in) ed fro inv ing tivi ties t ca rat est ge ne m ac	(	9) 6, 49 6, 76	2, 85 3, 01 7
CA SH FL OW S F RO M FIN AN CIN G A CT IVI TIE S
Re fun d o f g de its eiv ed tee ua ran pos rec	(	13, 07 1) (	21 3, 185 )
Div ide nds id t of th pa o o wn ers e c om pa ny	(	6) 31 4, 63	-
Bu bac k o f tr ha ea sur y s res y-	(	20 0, 95 5)	-
Ne sh d in fin cin ctiv itie t ca use an g a s	(	52 8, 66 2) (	21 3, 185 )
EF FE CT O F E XC HA NG E R AT E C HA NG ES O N C AS H A ND CA SH EQ UIV AL	( EN TS	5) 31 8, 84	144 644 ,
CR SE INC AS N C AS CA SH EQ TS NE T ( DE EA ) RE E I H A ND UIV AL EN	(	20 39 6, 75 9) ,	2, 44 4, 61 7
CA SH AN D C AS H E Q UIV AL EN TS BE GIN NIN G O F T HE YE AR ,		8 55 743 55 , ,	53 29 8, 94 1 ,
CA SH AN D C AS H E Q UIV AL EN TS EN D O F T HE YE AR ,	\$	\$ 9 35 34 6, 79 ,	55 743 55 8 , ,