Archos annual results and 2011 strategy presented at Press conference March 18th 2011
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2010 Annual Results
18 March 2011
This presentation and information included herein constitute a communication of a promotional nature and not a prospectus in the sense of the Directive 2003/71/CE of the European Parliament and Council dated 4 Nov 2003. This document cannot be considered as a public offering for subscription or an invitation to purchase the company’s shares. For further and more detailed financial information, please refer to the
company’s official press releases and documentation registered and approved by the French stock market authorities “Autorité des Marchés Financiers”.
1.2010 Results
–P&L
–Balance Sheet
–Analysis
–2011
2.Why ARCHOS will succeed in 2011?
3.ARCHOS, changing dimension
Winning turnaround
4 quarters in a row with double digit growth
2009: 1st year of Turnaround, ARCHOS back into MP3
2010: 2nd year of Turnaround, ARCHOS leader in Android tablets
Profit & Loss
2010 vs 2009
Consolidated Profit & Loss (in M€) | 2010 | 2009 | Var M€ | Var % | |
Revenue | 83,3 | 57,9 | 25,4 | 44% | |
Gross Margin | 19,4 | 7,8 | 11,6 | 148% | |
Gross Margin rate % | 23,3% | 13,5% | |||
Operating Expenses | 19,2 | 18,7 | 0,5 | 2% | |
Current Operating Income | 0,2 | -10,9 | 11,1 | ||
Revenue: +44 % | Fixed expenses are flat |
Gross Margin: +10 points | +11.1 M€ Current Operating Income |
Profit & Loss by semester
2010 vs 2009
Consolidated Profit & Loss (in M€) | S1 | S1 | Var | S2 | S2 | Var | ||
2010 | 2009 | M€ | 2010 | 2009 | M€ | |||
Revenue | 30,5 | 27,7 | 2,8 | 52,8 | 30,2 | 22,6 | + 75 % | |
Gross Margin | 7,0 | 4,7 | 2,3 | 12,4 | 3,1 | 9,3 | ||
Gross Margin rate % 23,0% 17,0% | 23,5% 10,4% | + 12 pts | ||||||
Operating Expenses | 8,8 | 9,1 | -0,3 | 10,4 | 9,6 | 0,8 | ||
Current Operating Income | -1,8 | -4,5 | 2,7 | 2,0 | -6,5 | 8,5 |
Strong improvement in S2 10 vs S2 09
•+ 75% Revenue
•+ 12 points Gross Margin
•+ 8,5 M€ Current Operating Income
Net Result 2010
In M€ | 2010 | |
Current Operating Income | 0,2 | |
Non recurring expenses | -0,4 | |
Echostar Loan Interests | -1,0 | |
Other financial net expenses | -0,9 | |
Taxes | -0,2 | |
Net Consolidated Income | -2,3 | |
Other points of interest |
Echostar loan: 5 M€ costs 1 M€/year interests
Deferred tax assets: 29 M€
•Cumulated deferred taxes on Archos SA: 29 M€
•Only 15 M€ activated to date
Cash variance
Net Cash Variance (M€) | S2 2010 | S1 2010 |
Net Cash initial | 10,6 | 15,7 |
R&D Investment | -1,0 | -1,9 |
Working Capital Requirement | -1,9 | -6,8 |
Others1 | -0,1 | 3,6 |
Cash end of period | 7,5 | 10,6 |
Total Cash Variance | -3,0 | -5,1 |
1 Including capital increase of 6 M€ in S1 2010 |
S2 2010: +75 % growth in revenue BUT only 2 M€ used in Working Capital Requirement
Outcome of turnaround strategy
Product portfolio well balanced across price points
In-house | <100€ | 100€ - 200€ | 200€ - 300€ | >300€ | |
Partnership | |||||
Vision | |||||
MP3 Players | |||||
Android WiFi | |||||
Players | |||||
Android Home | |||||
Tablets | |||||
Android | |||||
Internet | |||||
Tablets | |||||
Windows | |||||
Tablets | |||||
S2 2010 | 25% | 30% | 30% | 15% | |
Turnover (%) | |||||
Why has P&L improved?
Sales
1st to address the market of Windows Tablets
– Sep 09: Archos 9 PC Tablet
1st to address the market of Android Tablets
– Sep 09: Archos 5 Internet Tablet
Diversified in three market segments
– 50 references: Android tablets, MP3 players, WiFi players
Well-balanced product portfolio
– 25% < 100€, 100€ < 30% < 200€, 200€ < 30% < 300€, 15% > 300€
New distribution channels opened with entry-level tablets
– Auchan, Carrefour, Sears, Kmart, Tesco, Asda…
Why has P&L improved ?
Gross Margin
Full-turnkey business model with manufacturing partners
–ARCHOS no longer purchases any components
–Optimized supply chain, reduced working capital
–Just-in-time delivery, fast stock rotation
–Reduced risk of inventory obsolescence
7 manufacturing partners yielding flexibility & diversity
– Flexibility in production capacity
7 manufacturing partners yielding cost optimization
–ARCHOS monitors and controls every detail of partners’ BOM* cost
–Comparing BOM* costs amongst partners yields cost reduction
*BOM: Bill of Material (FR: nomenclature des composants)
Tablets: the fastest ramping mobile device
ARCHOS & ARNOVA market positioning
2011 Tentative Tablet Market Profile (M units) | |||||||
30 | |||||||
18 M units in 2010 | |||||||
25 | 50 M units in 2011* | 25(50%) | |||||
20 | |||||||
3 B€ | |||||||
15 | |||||||
10 | |||||||
8 (15%) | 8 (15%) | ||||||
5 (10%) | 5 (10%) | ||||||
5 | |||||||
0 | < 200€ | 200€-300€ | 300€-400€ | 400€-600€ | > 600€ | Retail Price | |
ARNOVA tablets in the 100€-200€ retail price range
ARCHOS tablets in the 200€-400€ retail price range
* IBC: 44M, Gartner: 55M, Morgan Stanley: 55M
2011 Current business trend
Turnover Q1 2011 higher than Q4 2010
Turnover Q4 2010: 36 M€
– traditionally Q4 is by far the highest quarter in the year
Turnover Q1 2011 should be higher
than Q4 2010
No signs of slowdown in Q2
2011
Tentative Business Model
What if ARCHOS had 5% market share of tablets under 400€
2011 | Gross Margin | OPEX | EBIT | ||||||||||||||
Net Sales | 37 M€ | 25 M€ | 12 M€ | ||||||||||||||
160 M€ | 23% | 17% | 7.5% | ||||||||||||||
2012 | Gross Margin | OPEX | EBIT | ||||||||||||||
Net Sales | 60 M€ | 35 M€ | 25 M€ | ||||||||||||||
260 M€ | 23% | 15% | 9.5% | ||||||||||||||
Worldwide tablet market: 2010: 18 M, 2011: 50 M, 2012: 80 M* Estimated value of market for tablets < 400€ retail price: 3 B€
Note: the above does not constitute a forecast but merely an evaluation of business model based on ARCHOS taking a 5% market share in the market of tablets below 400€ retail price including VAT
*2011 forecast by: IDC:44M, Gartner:55M, Morgan Stanley: 55M and 83M in 2012
1.2010 Results
2.Why ARCHOS will succeed in 2011?
1.First mover advantage
2.Innovation
3.Key technology differentiators
4.Unique Franco-Chinese engineering model
3.ARCHOS, changing dimension
1- First mover advantage
ARCHOS in 2010, 3rd generation of tablets
2008 | 2009 | 2010 |
5” & 7” Archos’ OS | 5” Android & 9” Windows | 7” & 10” Android |
•Still few contenders in tablet market one year after 1st iPad
–Apple iPad, Motorola Xoom, ARCHOS Internet Tablet, Samsung Galaxy Tab
–Hundreds of other tablets have been released but none has managed yet to make a dent in this new market: Dell,Toshiba, Huawei, LG, HP…
In MP3 market, only first movers have succeeded
–Apple, Creative, ARCHOS, iRiver, Samsung, Philips were present at start 10 years ago
–Many others have failed afterwards: Thomson, Sandisk, Dell, Microsoft…
–Microsoft has spent $B’s in 4 generations of Zune, just thrown in the sponge
In GPS market, only first movers have succeeded
– TomTom & Garmin were there at the beginning
In Smartphone market, only first movers have succeeded
–Apple, HTC, Samsung, LG, RIM were there at the beginning
–Nokia, Sony now striving hard
–All others, gone with the wind…
2- Innovation
4 disruptive technologies in 10 years
2000 | 2003 | 2005 | 2009 |
1st HD-based MP3 player | 1st Video Player | 1st WiFi MID | 1st Android Tablet |
ARCHOS has constantly renewed itself through innovation
–Reputable long-standing R&D team based in France, Germany and China
–R&D team recognized by technology leaders: TI, Google, Qualcomm…
ARCHOS continues to innovate
–In tablets: Generation 9 released in June 2011
–In consumer electronics: more gadgets to come in 2011
Unlike PC’s, tablet technology is by no means stabilized
–Innovation capability will remain key to success in years to come
–PC manufacturers may not be the best players at this game
3- Key technology differentiators
4 key differentiators in Gen 9 tablets to be released in June 2011
Plastic-overmolded stainless steel structure
–Thinner, lighter and stronger tablet enclosure
–Better cost-effectiveness than competing solutions
–Patented techno used since Gen 7 in 2009
ARCHOS alone to use Hard Disks in tablets
–Deep redesign of Android low-level software layers to support HD’s
–ARCHOS has a long experience in using HD’s for mobile devices
–Price: 250 GB HD = 32 GB Flash Memory
ARCHOS 1st to use ARM Dual Core A9 @ 1.6 GHz
–Forefront competition limited to ARM Dual Core A9 @ 1GHz (iPad 2, Xoom…)
–All Gen 9 tablets targeted at 1.6 GHz
New disruptive 3G modem solution for tablets
–Will allow ARCHOS to make headway into telcos
–Implemented in all Gen 9 tablets
–Patent pending
4- Unique Franco-Chinese engineering model
ARCHOS leverages its R&D to make a diversity of entry-level tablets
– | Most innovative developments: IN-HOUSE | ARCHOS Tablets | ||||
INDUSTRIAL | ARCHITECTURE | HARDWARE | SOFTWARE | MANUFACTURING | QUALITY CONTROL | |
DESIGN | DEVELOPMENT | DEVELOPMENT | ||||
– | Other developments: PARTNERSHIP ARNOVA Tablets | |||||
INDUSTRIAL | ARCHITECTURE | HARDWARE | SOFTWARE | MANUFACTURING | QUALITY CONTROL | |
DESIGN | DEVELOPMENT | DEVELOPMENT | ||||
Entry-level ARNOVA tablets
–ARCHOS’ R&D leverages what it does best:
Industrial design, product architecture, user interface and applications
–Chinese Industrial Partner concentrates on what it does best:
Product development, cost-effective procurement and manufacturing
With 4 manufacturing partners for tablets, ARCHOS can:
–Make a diversity of tablets to address all segments of entry-level market:
3 ARNOVA tablets today 6 more to come in the Summer
–ARNOVA tablets or White-Label tablets for OEM market:
Emerging markets, Retailers’ brands, Vertical professional niches
4- Unique Franco-Chinese engineering model
ARCHOS has the best economical equation to make tablets
– | Most innovative developments: IN-HOUSE | ARCHOS Tablets | ||||
INDUSTRIAL | ARCHITECTURE | HARDWARE | SOFTWARE | MANUFACTURING | QUALITY CONTROL | |
DESIGN | DEVELOPMENT | DEVELOPMENT | ||||
– | Other developments: PARTNERSHIP ARNOVA Tablets | |||||
INDUSTRIAL | ARCHITECTURE | HARDWARE | SOFTWARE | MANUFACTURING | QUALITY CONTROL | |
DESIGN | DEVELOPMENT | DEVELOPMENT | ||||
4 manufacturing partners for tablets yield cost optimization:
–ARCHOS controls every detail of partners’ tablet BOM cost
–Comparing BOM costs amongst partners yields cost effectiveness
–Cost reductions learned from partners are used in ARCHOS’ products
–ARCHOS optimizes BOM costs across partners
ARCHOS can offer the best value for money because:
–ARNOVA & White-Label entry-level tablets have the best economical equation
–ARCHOS branded tablets inherit the lessons learned from partners
1.2010 Results
2.Why ARCHOS will succeed in 2011?
3.ARCHOS, changing dimension
ARCHOS, changing dimension
ARCHOS, en route to reach critical size of 200 M€ turnover
- High-end tablets | ||||||||||
$200€ to $400€ | ||||||||||
- MP3 & WiFi players | ||||||||||
White-label | ||||||||||
Retailer’s brand | ||||||||||
- Entry-level tablets | - Entry-level tablets | |||||||||
$99€ to $199€ | $99€ to $199€ | |||||||||
Innovation | ||||||||||
Brand | ||||||||||
Cost-effectiveness | ||||||||||
BtoB | ||||||||||
TELCOS | ||||||||||
- Education | ||||||||||
- ARCHOS tablets | - Health | |||||||||
- Disruptive 3G modem solution | - Security | |||||||||
- Industry | ||||||||||