Earnings Release • May 16, 2013
Earnings Release
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Key Account sales affected by the deterioration in the automotive environment Marketing of Retail infotainment products gradually being ramped up Multimedia product penetration continuing to develop Operating expenses kept under control, R&D investments maintained
| Consolidated accounts(1) - IFRS (€M) | Q4 2011 | Q4 2012 | Change | Q1 2012 | Q1 2013 | Change |
|---|---|---|---|---|---|---|
| Revenues | 71.7 | 73.0 | +2% | 64.4 | 57.4 | -11% |
| Gross operating margin | 38.5 | 38.1 | -1% | 34.7 | 29.7 | -14% |
| % of revenues | 53.7% | 52.2% | 53.9% | 51.7% | ||
| Income from ordinary operations | 10.6 | 6.8 | -36% | 8.1 | 0.6 | -92% |
| % of revenues | 14.7% | 9.3% | 12.5% | 1.1% | ||
| EBIT | 9.3 | 6.8 | -27% | 8.1 | 0.6 | -92% |
| % of revenues | 13.0% | 9.3% | 12.6% | 1.1% | ||
| Net income (Group share) | 10.9 | 4.4 | -60% | 5.0 | 0.7 | -86% |
| % of revenues | 15.3% | 6.0% | 7.7% | 1.2% | ||
| Earnings per share | 0.85 | 0.34 | -60% | 0.39 | 0.05 | -86% |
| Diluted earnings per share | 0.81 | 0.32 | -60% | 0.37 | 0.05 | -86% |
| cosys Net debt | 86.6 | 81.2 | 93.5 | 77.8 |
(1) Consolidated earnings for 2012 include DiBcom and Varioptic for the full year, senseFly from the fourth quarter.
Over the period, Parrot recorded 57.4 million euros in consolidated revenues, down 11% in relation to the first quarter of 2012. Compared with the fourth quarter of 2012, the changes are not particularly representative due to the favorable impact of the seasonality of end-of-year sales on Retail products.
For the first quarter, Retail Products represented 50% of the Group's revenues (versus 39% in Q1 2012), with Key Account products coming in at 50% as well (versus 61% in Q1 2012). Following on from the fourth quarter, the Key Account segment's dynamic commercial development has been held back by the downturn on the automotive market, with the good performances by Retail products partially offsetting this general trend.
In the first quarter of 2013, Key Account revenues (grouping together sales of multimedia connectivity solutions to industrial automotive firms, as well as related activities resulting from acquisitions) came to 28.7 million euros, compared with 39.4 million euros for the first quarter of 2012, down 27%. Revenues for the period are in line with trends from the fourth quarter of 2012.
The contraction in sales primarily reflects the drop in volumes, in view of (i) the destocking policy applied by the automotive industry faced with the downturn (estimated impact of -5 million euros for the quarter), (ii) an unfavorable basis for comparison linked to the end of exceptional orders (around -3 million euros for the quarter) since the fourth quarter of 2012, and (iii) the contractual reduction in sales prices in preparation for a new innovation cycle (around - 2 million euros for the quarter).
On the infotainment market, Parrot, which already works with six industrial operators, two of which will start equipping their models from the second half of 2013, is currently taking part in additional targeted prospecting campaigns, which essentially concern potential new clients.
In view of the current impact of the general environment on sales of Key Account automotive products, Parrot is able to confirm that, for the current year, the order book for the next three quarters represents approximately 30 million euros per quarter.
In the first quarter of 2013, Retail revenues (grouping together aftermarket installed handsfree systems, Plug & Play, Multimedia and "Other" products) climbed 15% to 28.7 million euros, compared with 25.0 million euros in the first quarter of 2012.
The three Retail infotainment products (Parrot Asteroid) have gradually been released since the end of February, with a positive response from the media and retailers. This launch is particularly strategic for the Group: the dynamic commercial development of Parrot Asteroid products will make it possible to balance revenues on installed handsfree systems over the year with a view to fully benefiting from the growth generated by the other ranges of Retail products, in addition to demonstrating Parrot's ability to position itself on this new infotainment market.
With distinctive innovations designed to offer consumers a rich digital environment adapted for cars, the new Parrot Asteroid range covered around 30% of the Group's global distribution capacity at the end of March. All the distribution networks worldwide are expected to receive deliveries by the end of this financial year. In this context, the new generation of products did not offset the drop in sales of first-generation installed handsfree systems over the period; globally, revenues on installed handsfree systems (22% of Group revenues / 44% of Retail revenues) are down 27%. Plug & Play products (7% of Group revenues / 15% of Retail revenues), renewed in 2012, have continued to make progress, with growth coming in at 24% for the quarter.
The penetration by the main Multimedia products (Parrot AR.Drone 2, Parrot Zik and Parrot Zikmu Solo) has continued to develop, achieving 294% growth, with this rate also benefiting from a favorable base effect (release of Parrot Zik from H2 2012, launch of Parrot AR.Drone in Q2 2012).
From a regional perspective, sales in Europe are down 7% in relation to the first quarter of 2012, affected by the decline in sales in Spain (-41%) and the Benelux region (-40%), while all the other countries are progressing. On the whole, revenues are balanced between the main countries (France 7% of Group revenues, UK 6%, Spain 4%, Germany 5%, Europe Export 8%). Conversely, business trends remained very strong in America (8% of Group revenues, +113%) and Asia (9% of Group revenues, +118%).
As Henri Seydoux, Parrot's Chairman, CEO and founder, concludes: "The Group intends to continue rolling out its strategy for expansion and innovation in line with its development plan for 2013. To finalize the new Retail products and meet the expectations of Key Account prospects, we maintained a high level of R&D investment during this first quarter; in this context, our results will be close to breaking even for the first half of the year.
Today, Parrot has the possibility to capitalize on new opportunities for growth on infotainment, multimedia and commercial drones. Our success on these markets depends to a great extent on our technological lead and that is why we have been implementing an ambitious strategy for expansion and innovation since 2009. The first benefits will be seen from the second half of 2013 and we are organized to get ready for a significant acceleration in 2015. We are moving forward with our transition to the infotainment market, the finishing line is approaching, this is not the time to slow down".
For the first quarter of 2013, Parrot's gross margin came to 51.7%, compared with 53.9% for the first quarter of the previous year. The change in the gross margin is due to (i) the reduction in the percentage of revenues generated by Key Accounts and (ii) the lower margins on the new Retail products, with their rate to gradually improve, (iii) offset punctually by sales of end-of-life products.
Over the first quarter, EBIT came to 0.6 million euros, giving an operating margin of 1.1%. R&D spending has been maintained, despite the slowdown in business due to the general environment, in order to ensure the development of infotainment solutions, drive the expansion on related high-potential markets and continue innovating in the Retail sector.
During the first quarter of this year, operating expenses totaled 29.0 million euros, up 2.4 million euros compared with the same period the previous year and down 2.4 million euros in relation to the fourth quarter of 2012. The changes in the main cost items were as follows:
ä R&D spending, at 12.5 million euros (22% of revenues), is up 37% year-on-year and 13% compared with the previous quarter, reflecting the finalization of the infotainment products launched during the quarter. At the start of the second quarter of 2013, the contracts for around 40 external contractors (out of a total of 101 at December 31st, 2012) were terminated. The resources set aside for R&D are focused in priority on two areas:
At March 31st, 2013, the Group's workforce represented 848 people, compared with 8301 at December 31st, 2012. R&D teams make up over 50% of the workforce, with 79 external contractors (compared with 101 at December 31st, 2012) meeting temporary technological needs.
Financial income and expenses include a non-cash exchange gain of 1.0 million euros (unrealized gain on the euro against the US dollar over the period) for the first quarter, compared with an unrealized exchange loss of 2.2 million euros in the first quarter of 2012. Investment income, net of the cost of debt, contributed 0.1 million euros, while the tax expense for the quarter came to 1.2 million euros.
In this way, net income (Group share) totaled 0.7 million euros for the first quarter of 2013, representing 0.05 euros per share, with a net margin of 1.2%.
At March 31st, 2013, Parrot had 77.8 million euros in net cash, compared with 81.2 million euros at December 31st, 2012. Investing cash flow, primarily capitalized R&D in line with traditional levels, totaled 3.9 million euros, coming in higher than the 1.8 million euros in net cash from operations for the quarter.
In addition, Parrot has continued moving forward with its share buyback program (2.3 million euros over the quarter) in accordance with its objectives (i) to award bonus shares and stock options representing around 2% of its capital per year in connection with employee loyalty programs and (ii) to offset the dilution resulting from stock options being issued through the cancelation of shares.
At March 31st, 2013, inventories came to a total of 41.4 million euros (versus 43.7 million euros at December 31st, 2012), with the gradual stock reduction plan continuing to be rolled out in view of the economic climate. Trade receivables represent 41.8 million euros (versus 49.6 million euros at December 31st, 2012), with 34.6 million euros in trade payables (versus 43.4 million euros2 at December 31st, 2012). The Group's shareholders' equity is up to 188.6 million euros, compared with 188.5 million euros at December 31st, 2012. Net assets per share represent 14.7 euros (compared with 14.8 euros at December 31st, 2012).
In 2013, Parrot needs to continue steering its transition from its traditional market for handsfree systems towards the infotainment market, securing its future growth. Faced with its historical market reaching maturity, the Group has been preparing since 2009 to renew its product ranges in order to capitalize on a new wave of innovation. Parrot is banking on the digitalization of the car and aims to continue expanding in multimedia and related high-potential markets. In this context, the development plan for 2013 is built around four priorities:
1 The headcount figures at December 31st, 2012 and March 31st, 2013 include senseFly.
2 The option to buy out senseFly's remaining capital, initially recorded under "trade payables on fixed assets", has been reclassified under "other non-current liabilities".
For 2013, Parrot will be taking the deterioration in the economic environment into consideration, but aims to move forward with its key investments. Within this framework, Parrot is forecasting:
With a portfolio of complementary technologies, strong R&D capabilities and a commitment to developing on related high-potential markets, Parrot aims to lay the foundations in 2013 for a new wave of strong growth. To achieve this objective, the Group is banking on its penetration on the infotainment market, the renewal of its success on smartphone-connected Multimedia products and its gradual expansion on the commercial civil drone market.
Parrot, a global leader in wireless devices for mobile phones, stands on the cutting edge of innovation. The company was founded in 1994 by Henri Seydoux as part of his determination to drive the inevitable breakthrough of mobile phones into everyday life by creating high-quality, user-friendly wireless devices for easy living.
Parrot has developed the most extensive range of hands-free systems on the market for cars. Its globally recognized expertise in the fields of mobile connectivity and multimedia around Smartphones has positioned Parrot as a key player of in-car infotainment.
Additionally, Parrot designs and markets a prestigious line of high-end wireless multimedia products in collaboration with some of the world's most renowned designers. Finally, Parrot is expanding on the UAV market with the Parrot AR.Drone, the first quadricopter piloted via Wi-Fi and using augmented reality with new solutions for professional use.
Parrot, headquartered in Paris, currently employs more than 700 people worldwide and generates the majority of its sales overseas. Parrot is listed on NYSE Euronext Paris since 2006. (FR0004038263 – PARRO)
More information: www.parrot.com / www.ardrone.com / www.parrotoem.com
Analyst and investor relations, financial media: Marie Ein - T.: +33(0) 1 48 03 60 60 - [email protected] Technology and other media Vanessa Loury T.: +33(0) 1 48 03 60 60 [email protected]
Consolidated earnings for 2012 include DiBcom and Varioptic over the full year and senseFly from the fourth quarter of 2012. The consolidated accounts were approved by the Board of Directors on May 14th, 2013.
| Consolidated revenues €M and % of revenues |
Q1 2012 Q1 2013 |
Change yoy |
Q4 2012 | Change qoq |
||||
|---|---|---|---|---|---|---|---|---|
| Installed handsfree systems | 17.5 | 27% | 12.7 | 22% | -27% | 15.5 | 21% | -18% |
| Plug & Play products | 3.4 | 5% | 4.2 | 7% | +24% | 4.5 | 6% | -6% |
| Multimedia products | 2.4 | 4% | 9.6 | 17% | +294% | 21.6 | 30% | -56% |
| Other | 1.7 | 3% | 2.2 | 4% | +32% | 2.1 | 3% | +5% |
| Total Retail revenues | 25.0 | 39% | 28.7 | 50% | +15% | 43.7 | 60% | -34% |
| Total Key Account revenues | 39.4 | 61% | 28.7 | 50% | -27% | 29.3 | 40% | -2% |
| Group revenues | 64.4 | 100% | 57.4 | 100% | -11% | 73.0 | 100% | -21% |
(1) Multimedia products: Parrot By and Parrot AR.Drone.
(2) "Other": primarily component sales to suppliers, ancillary sales to customers (marketing, delivery, etc.).
| Consolidated revenues €M and % of revenues |
Q1 2012 | Q1 2013 | Change yoy |
Q4 2012 | Change qoq |
|||
|---|---|---|---|---|---|---|---|---|
| EMEA | 20.5 | 32% | 19.1 | 33% | -7% | 27.8 | 38% | - 31% |
| America | 2.1 | 3% | 4.6 | 8% | +113% | 11.6 | 16% | -61% |
| Asia | 2.3 | 4% | 5.1 | 9% | +119% | 4.4 | 6% | +16% |
| Total Retail revenues | 25.0 | 39% | 28.7 | 50% | +15% | 43.7 | 60% | -34% |
| Total Key Account revenues | 39.4 | 61% | 28.7 | 50% | -27% | 29.3 | 40% | -2% |
| Group revenues | 64.4 | 100% | 57.4 | 100% | -11% | 73.0 | 100% | -21% |
| Consolidated accounts - IFRS (€M) | Q1 2012 | Q1 2013 | Change yoy |
Q4 2012 | Change qoq |
|---|---|---|---|---|---|
| Revenues | 64.4 | 57.4 | -11% | 73.0 | -21% |
| Gross operating margin | 34.7 | 29.7 | -14% | 38.1 | -22% |
| % of revenues | 53.9% | 51.7% | 52.2% | ||
| Research and development costs | 9.1 | 12.5 | +37% | 11.1 | +13% |
| % of revenues | 14.1% | 21.8% | 15.2% | ||
| Sales and marketing costs | 11.5 | 9.9 | -14% | 13.8 | -28% |
| % of revenues | 17.8% | 17.3% | 18.9% | ||
| General and administrative costs | 3.8 | 3.6 | -3% | 3.5 | +3% |
| % of revenues | 5.9% | 6.3% | 4.8% | ||
| Production and quality costs | 2.3 | 3.0 | +32% | 3.0 | 0% |
| % of revenues | 3.5% | 5.2% | 4.1% | ||
| Income from ordinary operations | 8.1 | 0.6 | -92% | 6.8 | -90% |
| % of revenues | 12.5% | 1.1% | 9.3% | ||
| EBIT | 8.1 | 0.6 | -92% | 6.8 | -90% |
| % of revenues | 12.6% | 1.1% | 9.3% | ||
| Cost of net financial debt | 0.4 | 0.09 | -76% | 0.2 | -58% |
| Other financial income and expenses | -2.2 | 1.0 | -146% | -0.7 | -241% |
| Share in income from equity affiliates | - | - | - | -0.2 | - |
| Corporate income tax | -1.3 | -1.2 | -10% | -1.7 | -29% |
| Net income (Group share) | 5.0 | 0.7 | -86% | 4.4 | -84% |
| % of revenues | 7.7% | 1.2% | 6.0% |
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