Transcript Document
2014 Investor Presentation
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Safe Harbor Statement
This presentation contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those preceded by or that include the words "believe," "expect," "anticipate," "future," “will,” "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation, the effectiveness of the Company’s multiple-brand, multiple channel strategy and the transitioning of its product development and sales focus to a “light-asset” model. Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. These forward-looking statements can change as a result of many possible events or factors not all of which are known to the Company, which may include, without limitation, requirements or changes adversely affecting the LCD and LED market in China; fluctuations in customer demand for LCD and LED products generally; our success in promoting our brand of LCD and LED products in China and elsewhere; our ability to have effective internal control over financial reporting; our success in designing and distributing products under brands licensed from others; management of sales trends and client mix; possibility of securing loans and other financing without fixed assets as collateral; changes in government policy in China; the fluctuations and competition in sales and sale prices of LCD and LED products in China; China’s overall economic conditions and local market economic conditions; our ability to expand through strategic acquisitions and establishment of new locations; compliance with government regulations; legislation or regulatory environments; geopolitical events, and other events and/or risks outlined in SGOCO's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F and other filings. All information provided in this presentation is as of the date of the issuance, and SGOCO does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
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Agenda
Company Overview Competitive Advantages Industrial Overview & Emerging Growth Opportunities Evolving Business Model & Growth Strategies Financial Snapshots Management Team Appendix
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Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
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Sgoco At a Glance
As of October 31, 2013 Stock Ticker: SGOC Stock Price: $3.40
Market cap: $58.5 M Share outstanding: 17.2M
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A Company in Transformation ….
Capturing enormous opportunities from China’s urbanization
• Wide range from Smart displays and PCs, ASPs to LCD/LED monitors and TVs
2012 2011
• • • • • • Develop and distribute products co-branded with top-tier brands Own in-house product development capabilities A multi-brand strategy supported by wide distribution network Target at China’s fast-growing 3 rd and 4 th tier cities Business model transformation in November, 2011 Sold manufacturing facilities and shifted focus to branding and distribution
2010
• Listed in NASDAQ with an offering of 1.3M ordinary shares at $5.00 per share.
2005
• Founded in China as a leading display products supplier and a OEM partner of choice.
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Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
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An Integrated “Channel” Solution Model
TRADITIONAL LCD/ Monitor
• • •
Product design Procurement R&D
• •
Co-brand product design Procurement BRAND SOLUTION OEM OEM
or
Distribution Distribution Distribution Retailer Consumers Retailer Consumers Retailer Consumers DISPLAY SOLUTION
•
Find target corporate customers
•
Find target industry verticals
• • • •
Product design Co-brand partnership Procurement R&D
or • • •
Design solution based services and products Co-brand partnership Procurement OEM Corporate customers OEM Industry Verticals
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A Multiple Brand Strategy
The company's flagship brand China's leading TV brand China's leading PC brand A leading brand in Tier 3 and Tier 4 markets A leading brand in Tier 3 and Tier 4 markets 9
An Extensive Channel Network in Tier 3 & 4 Markets
Heilongjiang Liaoning Inner - Mongolia Hebei Shandong Beijing | Headquarter Sichuan Shaanxi Chongqing Henan Jiangsu Anhui Hubei Zhejiang Jiangxi Hunan Fujian | Product center Guangxi Guangdong Shenzhen | Sales office Self-managed province-level distributors covering 19 provinces in China
A Market Driven Product & Solution Offerings
FUTURE GROWTH FOCUS: Application: Specific products and services target at industry verticals E-board Touch Screen Advertising LCD CCTV Monitor ADDITIONAL GROWTH BUSINESS: Smart Display Products Tablet PC All-in-ones (AIO) Part-in-ones (PIO) TRADITIONAL BUSINESS: LCD/LED Monitors, LCD/LED TVs LED Monitor LCD Monitor LED/LCD TV 3D TV Touch-screen Monitor
A Distinctive SGOCO Competencies
Low Credit Risk Business Model 4-Pronged Sales Strategy Rural Market Knowledge Highly Integrated Channel
Low AP risk : Direct control and billing to few distributors First-hand market information : Localized sales and CRM teams in key sales points Top tier licensing brands focus Continue to expand distribution networks High growth industries focus Continue to expand product and solution offerings Strong presence in rural display market Product development team owns market-know-how Cross-connected sales and product development team sharing market knowledge Successful early development in high margin products Big opportunities ahead in commercial International expansion through distribution Optimize Cross-channel synergies 12
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
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Expanding Addressable Display Market in China – Industry Verticals
• • •
Travel & Leisure Transportation & Infrastructure Education
Fast-growing demand for domestic travel. Intensive infrastructure investments in China, encouraged domestic travel and the growth of budget hotels.
By the end of 2013, 37% of classrooms in China will have an interactive display. Source: Futuresource.
Domestic Tourism Expenditure per Capita Growth in China RMB National Enrolment Breakdown 2012
Approx. 509.6 million students
Source: Ministry of Education of China Source: China National Tourism Administration
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Emergence of Solutions Driven Demand from Retail and Commercial
• • •
Household ASP Commercial ASP Younger generation’s need on sophisticated electronic devices Touchscreen Penetration in Desktop PCs
Interactive panel displays are gaining popularity: For 1H 2013, sales of interactive whiteboards & interactive flat panel displays in the education and corporate sectors up 20% Source: Futuresource China retained its position as the largest world country market, with 40% of the global market and 77% of the Asia region's sales.
Source: KDB Daewoo Securities Research The “Screenager” Era: Touch panels are in increasingly widespread use in a variety of applications, including mobile phones, tablets, notebook PCs, and in-car technology... (Nomura)
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Exponential Growth in Lower Tier Cities
• • •
TV PC Mobile/ Handheld Disposable Income of Urban Households 2008 ~ 2012 (2)
In China:
PC shipment to have double-digit growth until 2016. Lower tier cities are growth drivers. (1) Disposable income per capita of urban households up 9.6% to nearly RMB 25K.
(2) Urbanization rate at 42.2% in 2012 (3). 390 million people will move to urban areas by 2030.
Internet population to reach ≈ 800 mil by 2015. Mobile internet users up 18.1% yoy to 420 mil in 2012. (4) 210 mil fixed-line broadband subscribers by 2013, 270 mil by 2015 end, 400 mil by 2020 end (1) (2) (3) IDC, June 2012 National Bureau of Statistics of China Chinese Academy of Social Sciences, CASS
China Target Broadband Internet-access Penetration Rates Network type
Urban areas
By end of 2013
55%
By end of By end 2015 of 2020
65%
Fixed-line networks
Rural areas 20% 30% Overall 40% 50% 70%
3G and LTE
25% 32.5% 85% Source: China St at e Council, compiled by Digit imes, August 2013 4.
5.
Chinese Ministry of Industry and Information Technology, MIIT China’s Sate Council – 2013-2020 Broadband Development Plans 16
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
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Transformative Business Model Moves Up the Value Stack
Channels Multi-brands:
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Sgoco
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TCL Founder Povizon No. 10 SGOCO Brand Channels e-commerce Others ….
Display Solution
Sector Driven : Education Market Driven : Media Display Channel Play = Combining products and display solution 18
Transformation in 4-Pronged Strategies
Strengthen brand & product portfolio Expand distribution channel Focus on high-growth industries Develop solution based services
Leverage on strong distribution network to sign up top tier brands Increase overall brand awareness for SGOCO and clients to capture additional market share Continue to expand in the traditional distribution network Look into emerging channels such as e-commerce to capture the shift of consumer behaviors in the market Identified high growth industries, such as budget hotel chains - provide them with tailored display products for their boutique size Self-develop and partner with brand clients to develop niche products o All-in-one PCs o Parts-in-one PCs 19
Product Driven Short-Term Growth Catalysts
All-in-One / Part-in-One PCs Design and Price is King!
Worldwide All-in-one Desktop PC Forecast
Features: Touch-screen, Built-in to a flat screen monitor, Multi-functional, Slim design. PIO also provides flexibility for users to configure and build their own PC system Target markets: Retail and Commercial use e.g. Budget hotels DisplaySearch 20
Solution & Channel Driven Mid to Long-Term Growth Catalysts
Target markets: High growth industries in China Education Infrastructure Travel and Leisure
Flexibility and Diversification is King!
Products Marketing Display Solution Brands Distribution 21
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
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Revenue Growth Traction Returned
US$ Millions
Total Revenue
3Q 2012:
• SGOCO was experiencing the transition to a “light-asset” business model. Therefore, the revenues were negatively impacted.
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Profitability Focused
Income from Operations & Operating Margin
US$ Millions US$ Millions 24
Stabilized Cash Position to Fuel Growth
US$ Millions
Cash and Cash Equivalents
US$ Millions
Inventories Working Capital & Current Ratio
US$ Millions 25
Shareholders’ Return Focused
Per Quarter
Return on Invested Capital
Per Quarter
Return on Equity
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Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
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A Dynamic Management Team
Mr. Tin Man Or
• • • • •
Chairman of the Board
Appointed as SGOCO’s Chairman of the Board in January 2014 Previously served as a director of the Board from 2010 to 2013 35+ years of experience in the investment and marketing of the display and trading industries throughout Greater China. Owns Sun Zone Investments Limited, which is the major shareholder of SGOCO Group. Served as General Manager of Honesty Group from 2005 to 2011, before SGOCO's sale of Honesty Group and transformation into a light-asset business model
Mr. David Xu
• • • • • •
Chief Executive Officer
Appointed as SGOCO’s CEO in January 2014 Served as SGOCO’s COO from July 2013 to January 2014 Served as SGOCO’s CFO from May 2011 to July 2013 Nearly 20 years of finance and accounting experience in both Asia and North America Previous employers include General Electric and Yum! Brands MBA from the University of Illinois at Chicago, and a BA in English and American Literature from Beijing Normal University
Mr. Johnson Lau
• • • •
Chief Financial Officer
CPA in Hong Kong and Australia Started with Deloitte in Hong Kong and Beijing from 1997, Mr. Lau has over 17 years of experience in the accounting profession Previous worked in various public companies in the US and England as Director of Finance and CFO for nine years Bachelor degree in commerce from Monash University, Australia 28
Company Overview
Competitive Advantages
Industrial Overview & Growth Opportunities
Evolving Business Model & Growth Strategies
Financial Snapshots
Management Team
Appendix
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P&L – Selected Items
$ in thousands except shares and per share data Revenues
Cost of Goods Sold
Gross Profit
Selling expenses General and administrative expenses Total operating expenses
Income (Loss) from Operations
Income before Provision for Income Taxes Provision for Income Taxes
Net income (loss)
Comprehensive Income
Earnings (Loss) per Share – basic & diluted
Weighted Average Number of Common Shares – basic & diluted
Three Months Ended September 30, 2013
2013 2012
42,969 26,047
39,501
3,468
259 765 1,024
2,444
2,667 513
2,154
2,180
0.12
25,105
942
212 1,482 1,694
(752)
(759) 331
(1,090)
(1,093)
(0.06)
17,254,860 17,059,860
Nine Months Ended September 30, 2013
2013 2012
156,754 103,272
144,341
12,413
815 2,435 3,250
9,163
9,210 1,942
7,268 7,400 0.42
95,692
7,580
460 4,166 4,626
2,954
2,946 1,887
1,059 974 0.06
17,172,720 17,059,860 30
Balance Sheet – Selected Items
$ in thousands except shares and per share data Cash
Accounts receivable Inventories Advances to suppliers
Total Current Assets Total Assets
Short-term loan Accounts payable Customer deposits Taxes payable
Total Current Liabilities Total Liabilities
Retained earnings
Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity As of September 30, 2013 13,681
54,393 25,709 20,502
120,204 120,445
11,451 8,342 6,098 7,915
34,477 34,505
60,312
85,940 120,445 As of December 31, 2012 11,548
59,355 5,725 28,511
105,386 105,647
6,230 12,038 1,155 7,147
27,314 27,332
53,044
78,315 105,647
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Cash Flow Statements – Selected Items
$ in thousands of U.S. dollars
Net cash provided by (used in) operating activities Net cash (used in) provided by investing activities Net cash provided by (used in) financing activities Increase in cash CASH, beginning of period
CASH, end of period Nine Months Ended September 30, 2013 Nine Months Ended September 30, 2012
(2,921) (29) 5,012 2,133 11,548
13,681
(12,138) 18,629 (254) 6,213 535
6,748
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Investor Relations Contact
Serena Wu
SGOCO Group, Ltd.
Direct Line: +86-10-8587-0173 Email: [email protected]
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