Business Report for H1 FY ending March 31, 2019 (April-September 2018)

Transcription

1 Business Report for H1 FY ending March 31, 2019 (April-September 2018) Wacom Chapter 2 Wacom Co., Ltd. (TSE 1st Sec. Code: 6727)

2 Contents Index 3 H1 FY 03/19 (April-September 2018) Results Overview 4-5 H1 FY 03/19 Results Overview by Segment 6-8 Summary of Forecast and Forecast Overview by Segment for FY 03/19 (Supplementary material) 9-13 H1 Financial Summary, Consolidated P/L, SG&A Expenses, etc H1 Consolidated P/L by Business Segment and Business Highlights (Ref.) Quarterly Sales Trend by Product Line, Sales by Regional Subsidiaries, Sales Changes in Local Currencies Base in Brand Business, Consolidated B/S, C/F Footprint for H1 FY 03/ FY 03/19 Forecasts Medium-Term Business Plan announced on May 11, Disclaimer All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 2

3 H1 FY 03/19 Results Overview Consolidated net sales: JPY 46.3 bn (YOY +14%) Operating profit: JPY 2.7 bn (YOY +82%) Net profit: JPY 2.0 bn (YOY +18%) Posted record highs in sales (JPY 28.4bn), operating profit (JPY 3.1bn), and net profit (JPY 2.1bn) during Q2 (Jul. to Sep. period). Significant increase in sales and profit in Technology Solution Business owing to front-loaded demand exceeded decline in sales and profit in Brand Business. Note: Net profit is equivalent to profit attributable to owners of parent All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 3

4 H1 FY 03/19 Results Overview by Segment -1 Brand Business Sales: JPY 20.7 bn (YOY -8%) Segment profit: JPY 1.9 bn (YOY -26%) Sales decline in pen tablet product due to slower market penetration of new mid- and low-priced models in a changing competitive environment. Slight sales decrease in display product due to supply issues of new models which did not sufficiently meet market demand accompanying temporary increase of expenses. Significantly lower profit resulting from unfavorable product mix caused by these factors. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 4

5 H1 FY 03/19 Results Overview by Segment - 2 Technology Solution Business Sales: JPY 25.6 bn (YOY +43%) Segment profit: JPY 5.0 bn (YOY +40%) Significant increase in sales and profit, owing to expanded demand and front-loaded demand for smartphones, tablets, and notebook PCs. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 5

6 Summary of Forecast for FY 03/19 Consolidated net sales: JPY 89.0 bn (YOY +8%) Operating Profit: JPY 4.0 bn (YOY +13%) Net Profit: JPY 3.0 bn (YOY +26%) Sales forecast was revised upward by JPY 4.0bn on Oct. 12. No revisions to the previous profits forecast announced on May 11. Forecasts by business segment were revised (see page 7-8). Note: Net profit is equivalent to profit attributable to owners of parent All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 6

7 FY 03/19 Forecast Overview by Segment -1 Brand Business Previous forecast Sales: JPY 49.0 bn (YOY +2%) JPY 50.3bn Segment profit: JPY 6.5 bn (YOY+0.5%) JPY 9.7bn Profitability revised down from the previous forecast due to unfavorable product mix and a negative risk factor attributable to additional tariffs imposed on China by the U.S. Implemented additional measures for the year-end sales season(oct. to Dec. period) to recover sales in the Creative Business. From September, reorganized global sales and marketing structure to focus more on customers in each region. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 7

8 FY 03/19 Forecast Overview by Segment -1 Technology Solution Business Previous forecast Sales: JPY 40.0 bn (YOY +19%) JPY 34.7bn Segment profit: JPY 5.9 bn (YOY +4%) JPY 2.6bn Both sales and segment profit revised up from the previous forecast owing to improvement in profitability driven by demand expansion. Estimate lower profitability from Q3 compared to the same period of the previous FY in consideration of the impact from front-loaded demand to H1 from H2 (see page 12), necessary R&D investment, and uncertainties resulting from its business nature. (Note) In light of the business nature, the profit and loss forecast may fluctuate in the short term. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 8

9 Financial Results for H1 FY ending March 2019 Supplementary material All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 9

10 H1 FY 03/19 Financial Summary Business Performance H1 FY 03/19 YOY Change Net Sales JPY 46,263 mil % Operating Profit 2,734 mil % Ordinary Profit 2,912 mil % Net Profit after Tax 1,975 mil % Financial Indices H1 FY 03/19 YOY Change EPS JPY BPS (Ref.) Average Forex rate H1 FY 03/19 YOY Change 1 USD JPY % (strong yen) 1 EUR % (weak yen) 1 CNY % (weak yen) All Rights Reserved. Copyright 2018 Wacom Co., Ltd. Note: Net profit is equivalent to profit attributable to owners of parent 10

11 Consolidated P/L SG&A ratio continues to fall (see next page) and higher OP ratio than the previous FY despite falling GP ratio. (Unit: JPY million) H1 FY 03/18 H1 FY 03/19 YOY Change 04/17-09/17 04/18-09/18 Amount Ratio Net Sales 40,689 46,263 5, % Gross Profit 15,703 15, % profit margin % 38.6% 34.0% SG&A 14,202 12,994-1, % SG&A ratio % 34.9% 28.1% Operating Profit 1,501 2,734 1, % profit margin % 3.7% 5.9% Ordinary Profit 1,642 2,912 1, % Net Profit after Tax 1,674 1, % All Rights Reserved. Copyright 2018 Wacom Co., Ltd. Note: Net profit is equivalent to profit attributable to owners of parent 11

12 SG&A Expenses Reduced SG&A by JPY 1.2bn through optimaization resulting in decrease of the ratio to sales by 6.8pts H1 FY 03/18 H1 FY 03/19 YOY Change (Unit: JPY million) 04/17-09/17 04/18-09/18 Amount Ratio Personnel 4,833 4, % R&D 2,061 1, % Ad. & Promo. 1,544 1, % Subcontractor 1, % Depreciation % Others 3,859 3, % Total 14,202 12,994-1, % SG&A ratio % 34.9% 28.1% -6.8pts (1) In H1 FY03/18, high level of R&D and promotional expenses for new product launch, in H1 FY03/19, lower SG&A through careful supervision of expenditure before year-end sales season. (2) Reduction of expenses related to the global IT system. (3) Decrease in provision of allowance for doubtful accounts (JPY 0.23bn) booked in H1 FY03/18, and other expenses. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 12 (1) (1) (2) (3)

13 (Ref.) Reason for Changes in Operating Profit Reason for changes in operating profit excluding currency impacts (year on year) (1) Tech. Solution Business: Gross profit up due to increased sales: JPY +1.5bn (Including impact from front-loaded demand from Oct.-Dec. : Approx. GP 1.3bn yen to Sales 4.2bn yen) (2) Corporate function: Decease of SG&A expenses: JPY +0.4bn (3) Brand Business: Negative impacts from unfavorable product mix due to sales decrease of display products, and GP decline due to temporary expenses such as air freight for display products: JPY -0.8bn Impact of currency fluctuations (year on year) Currencies Changes of forex Sales OP 1 USD JPY (strong yen) JPY bn JPY bn 1 EUR (weak yen) bn bn Asian currencies total Including CNY (lower column) (weak yen) bn bn bn bn Grand Total bn bn All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 13

14 Business Segment for H1 FY (Apr.-Sep., 2018) Brand Business Creative Business for creative users Product line: Pen tablet, Display, Mobile Business Solution for enterprise Product line: Digital signature pen tablet, Display pen tablet, etc. Technology Solution Business Technology solution for partners of smartphone, tablet, digital stationery, etc. Product line: Digital pen sensor system, etc. Ink Division Digital ink, software solution, etc. Product line: Digital stationery for consumers, etc. (Note) Other Business: Engineering Solution Business (CAD software) was assigned to a new company by company split on December 1, On the same day, all shares in the new company were transferred to Nitto Kogyo Corporation. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 14

15 Consolidated P/L by Business Segment H1 FY 03/18 H1 FY 03/19 YOY Change 04/17-09/17 04/18-09/18 Amount Ratio Net Sales total 40,689 46,263 5, % Brand Business 22,442 20,661-1, % Tech. Solution Biz. 17,902 25,602 7, % Other Business % Operating Profit total 1,501 2,734 1, % Brand Business 2,549 1, % Tech. Solution Biz 3,531 4,958 1, % Other Business % Adjustment (Corporate, etc.) -4,541-4, % profit margin % 3.7% 5.9% (Unit: JPY Million) All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 15

16 Business Highlights (trending topics in sales) (Unit: JPY) Brand Business 20.7 bn YOY -8% Creative Business 17.0 bn YOY -10% (subsection) Pen Tablet 9.3 bn YOY -11% Display 6.3 bn YOY -2% Mobile 1.4 bn YOY -32% Sales of pen tablet products decreased due to slower market penetration of new mid- and low-priced products targeting general consumers, despite increased sales for professional models. Sales of display products declined slightly as supply of new models did not sufficiently meet market demand. Sales of mobile products declined significantly as existing models entered the later stages of their product life cycles. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 16

17 Business Highlights (trending topics in sales) Brand Business (Unit: JPY) Consumer Business 1.2 bn YOY -27% Sales of stylus product optimized for Windows Ink decreased, with sales decelerating in the more than one year since the launch in June Business Solution 2.5 bn YOY +24% Sales increased owing to favorable sales of LCD signature tablet products to financial institutions and LCD pen tablet products to educational institutions in North America. STU 540 DTH-2425 All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 17

18 Business Highlights (trending topics in sales) (Unit: JPY) Tech. Solution Business 25.6 bn YOY +43% Pen Sensor System for Smartphones 11.8 bn YOY +80% Sales increased significantly owing to front-loaded demand for the latest model, and continued sales for the existing model from the sole customer Samsung. Pen Sensor System for Tablets, others 13.8 bn YOY +22% Sales increased owing to front-loaded demand and expanded sales of Active-ES (AES) pen sensor systems from good reputation gained among manufacturers. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 18

19 (Ref.) Quarterly Sales Trend by Product Line (Unit: JPY Million) 25,000 21,936 20,000 16,676 20,535 20,943 28,402 24,723 24,584 16,575 16,990 17,861 15,966 15,000 13,261 10,000 5, / /1-3 16/4-6 16/7-9 16/ /1-3 17/4-6 17/7-9 17/ /1-3 18/4-6 18/7-9 Creative Consumer(Stylus, etc.) Business Solution Tech. Solution CAD, etc. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 19

20 (Ref.) Sales by Regional Subsidiary (Year on Year) (Unit: JPY Million) 40,000 30,000 20,000 10,000 40,689 6,631 *3,347 5,295 6,937 3,924 *3,579 17, % 46,263 6,172 *3,330 4,894 6,714 2,881 25,602 Asia Oceania *Sales in China of Asia Oceania Germany U.S. Japan *Sales excluding Engineering Solution in Japan Tech. Solution Change Ratio -6.9% (*-2%) -7.6% ( -10%) -3.2% ( -2%) -26.6% *-19.5% +43.0% There are no regional segments in Technology Solution. 0 H1 FY 03/18 H1 FY 03/19 (%) growth based on local currency (*% growth based on CNY) All Rights Reserved. Copyright 2018 Wacom Co., Ltd. (Note) The result of Japan for FY 03/18 included sales of Engineering Solution (CAD) 20 which was transferred on December, 2017.

21 (Ref.) Sales Changes on Local Currency Base in Brand Business Region Currency YOY Change Japan JPY -20% U.S. USD -2% Europe EUR -10% China CNY -2% Korea KRW -14% Australia AUD -23% Singapore USD +1% Hong Kong USD -7% Taiwan NTD -2% India INR -27% All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 21

22 (Ref.) Consolidated B/S End of March 2018 End of September 2018 (Unit: JPY Million) YOY Change Current Assets 42,195 51,802 9,607 Non-current Assets 8,714 10,061 1,346 Total Assets 50,910 61,863 10,953 Current Liabilities 16,752 26,572 9,820 Non-current Liabilities 11,489 11, Total Liabilities 28,241 37,930 9,689 Minority Interest in Subsidiaries Net Assets 22,668 23,933 1,265 Total Liabilities and Net Assets 50,910 61,863 10,953 Equity Ratio 44.5% 38.7% -5.8pts Key Changes Assets (Unit:JPY bn) Increase in other current assets 3.5 Increase in notes and accounts receivable-trade 3.5 The above changes mainly resulted from sales expansion in Technology Solution Business. Increase in inventories 3.0 The above changes mainly resulted from inventories for the year-end sales season sales in Brand Business. Liabilities Increase notes and accounts payabletrade 9.3 Net Assets Increase in shareholders equity 1.0 The above changes mainly resulted from an increase in retained earnings. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 22

23 (Ref.) Consolidated C/F H1 FY 03/18 H1 FY 03/19 YOY Change 04/17-09/17 04/18-09/18 Amount C/F from operating activities ,275 2,519 C/F from investing activities ,057-1,453 C/F from financing activities 2, ,980 Effect of change in exchange rate Increase-decrease of cash & cash equivalent Beginning balance of cash & cash equivalent Ending balance of cash and cash equivalent (Unit: JPY Million) 1, ,350 14,205 19,157 4,952 16,089 18,691 2,602 Major Activities in H1 FY 03/19 (Unit:JPY bn) C/F from operating activities Increase in notes and accounts payabletrade 9.2 Net profit before tax 2.8 Increase in notes and accounts receivabletrade -6.8 Increase in inventories -2.8 C/F from investing activities Purchase of intangible assets -1.1 Purchase of tangible assets , C/F from financing activities Cash dividends paid -1.0 All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 23

24 Footprint for H1 FY ending March 2019 All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 24

25 Announcement of collaboration with Microsoft - Collaborative pen model of Wacom and Microsoft - Appealed the experience of universal pen All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 25

26 Installed Pen in Google Pixel slate - Wacom Pen is installed in the latest model of the Google Pixel series - Pen penetration into the Google ecosystem All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 26

27 VR + Digital Ink Announcement of collaborative POC - Drawing in VR space - Provide the same pen and data format as the 2D drawing - Provide experiences moving between 2D and VR space POC: Proof of Concept All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 27 All Rights Reserved. Copyright 2018 Wacom Co., Ltd.

28 MR + Digital Ink Announcement of collaborative POC - Drawing in Mixed Reality - Provide experiences of sharing and collaboration of drawing All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 28 All Rights Reserved. Copyright 2018 Wacom Co., Ltd.

29 November 30, 2018 ANA InterContinental-Tokyo A global event hosted by Wacom to expand and deepen digital ink and stationery Connected Ink as a global event hosted by Wacom - Create Digital Stationery Market" as a new market with partners/customers All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 29

30 All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 30

31 Financial Forecasts for FY ending March 2019 Supplementary material All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 31

32 Assumptions of Forecast for FY 03/19 Forex rate assumptions USD 1 = JPY 111 (YOY weak JPY 0.2) Previous assumption: JPY 105 EUR 1 = JPY 130 (YOY weak JPY 0.6) No revision Sensitivity to currency fluctuations: 12-month forecast (unit: million yen) Unit of sensitivity In case of weak JPY 1.0 In case of the strong JPY, read the following signs of plus and minus the other way round. FY 03/19 (revised assumption) FY 03/19 (previous assumption) (for ref.) FY 03/18 (result) Currency USD* EUR USD* EUR USD* EUR Sales +630 (+520) (+470) (+450) +100 Operating Profit +50 ( -20) ( -70) ( -40) +50 (Note) Asian currency sensitivity is calculated on a pro forma basis as follows: In the case of forecasts, Asian currency exposure is included in USD exposure for sensitivity calculation, as Asian currencies are assumed to be pegged to the USD. In the case of actual results, the Asian currency impact amount has been directly included in the USD currency impact amount. Values in brackets show only the USD currency impact amount. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 32

33 Consolidated Forecast for FY 03/19 (Year on Year) (unit: million yen) H2 FY 03/18 (rslt.) H2 FY 03/19 (rev.) YOY 10/17-03/18 10/18-03/19 Change Net Sales 41,574 42,737 1,163 Operating Profit 2, % 1, % -760 Ordinary Profit 1, % 1, % -935 Net Profit % 1, % 317 FY 03/18 (rslt.) FY 03/19 (rev.) YOY 04/17-03/18 04/18-03/19 Change Net Sales 82,263 89,000 6,737 Operating Profit 3, % 4, % 473 Ordinary Profit 3, % 3, % 335 Net Profit 2, % 2, % 618 ROE 11% 13% -- All Rights Reserved. Copyright 2018 Wacom Co., Ltd. (Note) Net Profit is equivalent to Profit attributable to owners of parent. 33

34 Forecast by Business Segment for FY 03/19 (unit: million yen) FY 03/18 (result) FY 03/19 (revised) YOY 04/17-03/18 04/18-03/19 Amount Ratio Net Sales Total 82,263 89,000 6, % B Brand biz 48,173 49, % Tech. Solution biz 33,648 40,000 6, % Other biz % Operating Profit Total 3,527 4, % Branded biz 6,470 6, % Tech. Solution biz 5,678 5, % Other biz Adj. (corporate, etc.) -8,556-8, % Profit Margin % 4.3% 4.5% All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 34

35 Consolidated Forecast for FY 03/19 (vs Prev. Forecast) (unit: million yen) H2 FY 03/19 (prev.) H2 FY 03/19 (rev.) prev. vs rev. 10/18-03/19 10/18-03/19 Change Net Sales 43,670 42, Operating Profit 3, % 1, % -1,904 Ordinary Profit 3, % 1, % -2,242 Net Profit 2, % 1, % -1,315 FY 03/19 (prev.) FY 03/19 (rev.) prev. vs rev. 04/18-03/19 04/18-03/19 Change Net Sales 85,000 89,000 4,000 Operating Profit 4, % 4, % 0 Ordinary Profit 3, % 3, % 0 Net Profit 2, % 2, % 0 ROE 13% 13% -- All Rights Reserved. Copyright 2018 Wacom Co., Ltd. (Note) Net Profit is equivalent to Profit attributable to owners of parent. 35

36 Forecast by Business Segment for FY 03/19 (unit: million yen) FY 03/19 (previous) FY 03/19 (revised) prev. vs rev. 04/18-03/19 04/18-03/19 Amount Ratio Net Sales Total 85,000 89,000 4, % B Brand biz 50,300 49,000-1, % Tech. Solution biz 34,700 40,000 5, % Operating Profit Total 4,000 4, % Branded biz 9,700 6,500-3, % Tech. Solution biz 2,590 5,900 3, % Adj. (Corporate, etc.) -8,290-8, % Profit Margin % 4.7% 4.5% All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 36

37 Forecasts of R&D expense, Capex, and Depreciation for FY03/19 R&D expense JPY 5.0 billion (YOY +14%) No revision Key items: New products development and next-generation technology research, etc. in order to promote Technology Leadership Capital expenditure JPY 3.3 billion (YOY +118%) Previous forecast: 2.3 bn JPY Key items: Metal mold for products in Brand Business and Technology Solution Business, intangible assets, etc. Depreciation JPY 2.6 billion (YOY +7%) No revision Key items: Depreciation of metallic mold for products and global IT infrastructure All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 37

38 Shareholders Return Policy for FY 03/19 Basic policy of profit distribution Aims to provide stable and sustainable dividend payment and to exercise flexible treasury stock acquisition, while attaining sufficient retained earnings to enhance future business development and financial base. Dividend per share (forecast) No revision Dividend: JPY 6.00 per share for FY 03/19 (JPY 6.00 for FY 03/18) Payout ratio: 32.7% (41.2% for FY 03/18) All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 38

39 Wacom Chapter 2 Medium-Term Business Plan FY ending March FY ending March 2022 (An excerpt of presentation materials announced on May 11, 2018) All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 39

40 Wacom opens Chapter 2 Taking a new step as Technology Company All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 40

41 Corporate Level Strategy and Direction 1. Technology Leadership 2. Island & Ocean 3. Extreme Focus All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 41

42 High-priority Issues Technology Innovation through dialogues with customers Organization/Operation update Solid financial structure securing profitability Enhancement of management quality through BOD* update * BOD: Board of Directors All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 42

43 MTP: Consolidated P/L & Financial Indicator (unit: JPY million) FY 03/18 (FY35) FY 03/22 (FY39) CAGR Net Sales 82, ,000 5% Brand Business 48,173 60,400 6% Technology Solution biz 33,648 39,600 4% Operating Profit 3,527 10,000 Operating Margin 4.3% 10.0% Net Profit 2,362 6,948 ROE 11% 15-20% Capital Ratio 44% Approx. 60% In light of the business nature of Technology Solution Business, the profit and loss forecast may fluctuate in the short term. Therefore, high uncertain revenue opportunities are not included in the forecasts, and the risk factors assumed as of today are preferentially reflected in the forecast. All Rights Reserved. Copyright 2018 Wacom Co., Ltd. (Note) Net Profit is equivalent to Profit attributable to owners of parent. 43

44 Disclaimer Forward-looking statements regarding future events and performance contained in this presentation are based on currently available information and involve risks and uncertainties, including macroeconomic conditions, trends of the industry in which the company is engaged and progress in new technologies. Please note that actual results could materially differ from those expressed or implied by the forward-looking statements in this presentation due to these risks and uncertainties. Investor Relations Inquiries TEL: Wacom Co., Ltd. Sumitomo Fudosan Shinjuku Grand Tower 31F, Nishi-Shinjuku, Shinjuku-ku, Tokyo , Japan All Rights Reserved. Copyright 2018 Wacom Co., Ltd. 44