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Convening of an investor conference concerning Q1 2010 Business Review
1.Date of the investor/press conference:2010/04/28
2.Location of the investor/press conference:Conference call
3.Financial and business related information:
1Q10 BUSINESS REVIEW:
(1)1Q unit was 3.3mn which grew 37% yoy.
(2)1Q revenue reached NT$37.7bn, better than original guidance.
(3)1Q GPM was 30.3% (would be 31.5% excludes currency impact).
(4)1Q OPEX ratio came better than original guidance at 15.6%; therefore,
1Q operating margin reached 14.6%.
* All the numbers above are based on unconsolidated financial statements.
(1)Picking up growth momentum again shows our commitment and execution to drive scale and achieve absolute profit growth.
(2)Better than seasonal 1Q highlighted particular momentum recovery from Europe and Asia along with remained US strength; We see strong sequential unit growth from Europe/Asia regions for the quarter.
(3)Healthy sell through and prolonged life cycles are achieved on key 2009 products, such as HD2, Hero, Droid Eris & MyTouch, which also evidence solid recognition as well as consumer preference of HTC brand and portfolio.
(4)Commercial ramp, started from March on new products of Desire, Legend, HD Mini and Smart, plus announcement of EVO 4G and Droid Incredible Smart Phone & one to two more new products to come in 2Q, ensures our industry leadership position on technology as well as innovation.
(5)Launch of industry’s first 4G smart phone (EVO 4G on Sprint’s WiMax network) consistently show HTC technology leadership; historically, we were the first to enable 2G & 3G smart phones and with broadest 3G portfolio to cover UMTS, EVDO as well as TD-SCDMA; Benefited from that leadership position, HTC will be leading player again in 4G innovation.
(6)Latest HTC innovation of product design, unibody design, HTC Sense software and superior system performance, on recent portfolio such as HD2, Nexus One, Desire, Legend, HD Mini, EVO 4G and Droid Incredible, standing out HTC as premium smart phone brand and further raise the bar for quality & competition, which also help HTC brand awareness in the market.
(7)Professional recognition of HTC innovation globally on (1) HTC Hero:Best mobile device of 2009 from GSMA Mobile World Congress (MWC) on Feb. 2010. (2) HTC EVO 4G: Best phone of CTIA 2010 from CNET’s Best of CTIA Awards. (3) HTC Desire: No.1 of the 15 best mobile phones in the world from TechRadar on March 2010.
MATERIAL BOARD RESOLUTIONS:
(1)The outstanding common shares number is 773,935,844 shares, post the cancelation of the 15 million treasury share buyback.
(2)Proposed fiscal year 2009 earnings distribution
a.Cash Dividend: NT$ 26 per share.
b.Stock Dividend: NT$ 0.5 per share.
a.Cash: NT$ 2.91 bn.
b.Stock: NT$ 1.94 bn. (Number of shares shall be calculated based on the closing price one day prior to the 2010 regular shareholders’ meeting on an ex-dividend basis.)
2Q10 BUSINESS OUTLOOK:
(1)2Q unit expects to grow around 50% yoy to reach 4.5mn.
(2)2Q revenue expects to hit record high to approach NT$50bn.
(3)GPM expects to be around 30%± 0.5%*.
(4)OPEX ratio expects to be at the range from 15% to 15.5%.
*Microsoft Royalty is included in our cost according to new patent licensing agreement.
**All the numbers above are based on unconsolidated financial statements.
REVIEW ON THE GROW SCALE STRATEGY :
(1)We made the decision to grow HTC scale in order to gain marketing spending as well as overall operation efficiency thus strengthen HTC long term competitiveness at the end of 2009.
(2)Market was overly concerned and misinterpreted our strategic objectives by speculation of price war initiation, revenue weaken trend and profit sacrifice.
(3)Q1 result shows the scale strategy works and growth momentum comes back.
(4)The reasons of our success in scale strategy lie on financial management optimization, strong product portfolio, close customer relationship, increased brand awareness, sales/marketing execution and regional teams commitment.
(5)Management team is very careful & mindful to balance between growth strategy and financial discipline; solid 1Q result act as best evidence to show management’s prudence as well as aggressiveness.
(6)Management expects to grow scale while maintaining profitability in 1H, sustained operating margin (excludes currency impact) will be achieved in 1H10 while we expect significant first half (1H10) unit to grow over 40% yoy.
(7)Our scale growth strategy is based upon full product portfolio not just a specific view of a single product behavior; it is misleading to evaluate HTC growth and financial performance by mid to low end product only. We are excited to see strong volume ramp on mid to high end products at present. HTC financial model should be built from our overall product portfolio.
(8)We envision HTC Smart to bring both HTC brand and product portfolio to mass market consumers; the brand reach will expand our mid to high end smart phone to mass market in addition to Smart only, further creating scale benefit; Smart is our first mid to low end initiative and there is no meaningful financial contribution for 2010; however, it should increase consumer mindshare toward mass market and strengthen our long term brand awareness.
4.Any other matters that need to be specified:The material for the investor conference is disclosed under corporate governance item on Market Observation Post system and HTC Corporation Website.