3q’15 earnings release - cowayir.co.kr · 3q’15 earnings release. disclaimer -1- this...

3Q’15 Earnings release

DISCLAIMER

-1-

This presentation contains historical information of the company which should

not be regarded as an indication of the future performance or results.

This presentation also contains forward-looking statements that are, by the

nature, subject to significant risks and uncertainties.

These forward-looking statements reflect our current views with respect to

future events and are not a guarantee of future performance or results.

Actual results may differ materially from information contained in the forward-

looking statements as a results of a number of factors beyond our control.

CONTENTS

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1. 3Q’15 Earnings release

5. Appendix

2. Business Review

3. Consolidated Earnings

4. Business Review and Plan • 3Q YTD’15 Business Review & 4Q’15 Plan

• Revenue / Profits

• Consolidated revenue / profits

• Domestic health appliance business

• Overseas business

• Home-care and Cosmetics business

• Non-consolidated financial reports

• Consolidated financial reports

• Subsidiary results

3Q’14 3Q’15

66.4

3Q’14 3Q’15

496.1

13.4%

-3-

545.7

18.4%

2Q’15

527.5

2Q’15

85.0

16.1%

3Q YTD’14 3Q YTD’15

1,514.1

1,579.2

3Q’14 3Q’15 2Q’15

97.0 125.6

111.7

21.2% 23.0% 19.5%

284.3 336.2

21.3% 18.8% 13.1%

260.5

16.5%

3Q YTD’14 3Q YTD’15 3Q YTD’14 3Q YTD’15

100.4

197.7

1. Revenue and Profits

3Q’15 Revenue KRW 545.7 bn (+10.0% YoY)

Operating Profit KRW 125.6 bn (+29.5% YoY), Net Profit KRW 100.4 bn (+51.3% YoY)

- Historically high Revenue, Operating Profit, Net Profit

[Accounting standard: K-IFRS Non-consolidated financial reports]

Revenue Operating Profit Net Profit

[Unit: KRW bn] [Unit: KRW bn/ : Margin] [Unit: KRW bn/ : Margin]

-4-

- Total accounts 5.72 mn in 3Q’15 (+2.7% YoY, +0.2% QoQ)

- Rental accounts 4.78 mn (+5.3% YoY, +0.7% QoQ), Membership accounts 0.94 mn

(-8.1% YoY, -2.8% QoQ)

- Rental net adds 179k in 3Q YTD’15 (+76k YoY)

Accounts2)3)

- Rental gross adds 338k in 3Q’15 (+8.7% YoY, -8.9% QoQ)

: Weak rental gross adds in 3Q’15 QoQ due to seasonality, but strong YoY growth

- High gross adds driven by strong sales of main health appliance products

Rental gross adds3)

- Health appliance revenue KRW 486.5 bn (+11.1% YoY, +5.0% QoQ)

- Rental revenue KRW 376.4 bn (+6.7% YoY, +1.4% QoQ)

- Lump-sum and other health appliance revenue KRW 50.8 bn due to sales

increase of electric range, massage chair, vacuum cleaner and water softener

(+32.1% YoY, +8.1% QoQ)

- Financial lease revenue recognition of KRW 14.8 bn from new home-care sales system

463.5

371k

3Q’15 2Q’15 3Q’14

5,714k

3Q’15 2Q’15 3Q’14

3Q’15 2Q’15 3Q’14

486.5

5,723k

5,571k

338k 311k

438.0

2-1. Health appliance business

Total accounts 5.72 mn, rental gross adds 338k in 3Q’15

[Unit]

[Unit: KRW bn]

[Unit: Accounts]

1) Including other health appliance revenue (A/S, Installation and etc.): Applies to all health appliance revenue in this material

2) Excluding non-performing, 5 year maturity pending and free membership accounts: Applies to all accounts in this material

3) Including financial lease accounts & sales: Applied to all accounts and gross adds in this material

Health appliance1)

-5-

Continued growth of rental net adds in 3Q YTD’15

- Rental net adds 179k in 3Q YTD’15 (+76k YoY)

- Weak rental net adds in 3Q’15 due to increase of

5 year matured subscribers and cancellation rate

Enlarge rental net adds in 4Q’15 QoQ by increasing rental

gross adds and lowering cancellation rate

1Q 2014

51k 32k

20k

63k 66k

166k

81k

2013

141k

248k

2015(E)

Continued growth of rental gross adds

- Rental gross adds 1,049k in 3Q YTD’15

- Strengthen product competitiveness by releasing premium

products (Self sterilization IoT water purifier)

- Continued growth of rental gross adds due to strengthening

door-to-door and new sales channels

: Increase of sales forces and productivity, strengthen premium

product line-ups on new channels

179k

2Q 3Q 4Q 1Q 2Q 1Q 2014

311k

371k

317k 332k 341k

1,330k

371k

2013

1,166k

1,420k

2015(E)

1,049k

2Q 3Q 4Q 1Q 2Q

2014 2015

3Q

338k

32k

3Q

2014 2015


Continued growth of rental gross adds and rental net adds 3Q YTD’15

Rental gross adds Rental net adds

44.0

59.8

-6-

38.8

3.6%

4.7%

2.9%

40.4

2.9%

Slight increase of cancellation rate in 3Q’15

- Cancellation rate 1.01% in 3Q YTD’15

- Water purifier cancellation rate temporarily increased due to

increase of 3yr minimum rental period reaching customers in 3Q

Cancellation rate increased due to one-off increase of 3yr minimum

rental period reaching customers in July. However, cancellation rate

trend stabilized in August and recorded below 1% in September

2011 2012 2013

1.06% 1.05%

0.95%

2011 2012 2013 2014

9.9

2.7%

1.01%

10.1

2.7%

1Q 2Q

2015

0.98% 0.96%

1Q 2Q

2015

3Q

1.07%

10.8

2.9%

3Q

2014

1.01%

2.8%


Cancellation rate1)

Monthly cancellation rate

Rental asset disposal expense

[Unit: KRW bn] Rental asset disposal expense

% of rental revenue

Slight increase of cancellation rate,

Maintain stable rental asset disposal expense

1) Cancellation rate (2012 and 2012 before): Excluding non-performing accounts

Maintain stable rental asset disposal expense

- Rental asset disposal expense in 3Q YTD’15

: 2.8% of rental revenue

- Rental asset disposal expense maintained below 3% in 3Q’15 due

to continuous improvements in product and service quality


-7-

1,856.0

1,732.0

1,675.8

1Q 2014 2013 2015(E) 2Q 3Q 4Q 1Q 2Q

2014

3Q 3Q YTD

419.1

444.6

436.5 438.0 438.3

463.5 486.5

1,394.6

2015

Continued increase of health appliance revenue growth rate

Health appliance revenue

[Unit: KRW bn]

Steady revenue growth of health appliance business

- Health appliance revenue KRW 486.5 bn (+11.1% YoY, +5.0% QoQ)

- Continued growth of rental revenue by ARPU and rental net adds increase

- Continued growth of lump-sum revenue driven by sales increase of electric range, massage chair, vacuum cleaner

and water softener

- Financial lease revenue recognition of KRW 14.8 bn from new home-care sales system

Strengthen product competitiveness with IoT adopted product

IoT adopted air purifier (October)

- Most advanced IoT adopted air purifier with air quality measuring and notifying function

- Provides customized care service based on analysis of 60 days accumulated air quality

- Powerful suction function in both sides by adoption of dual filter system

Self sterilization IoT water purifier (August)

- Real time monitoring system for self sterilization process (water inflow/Circulation/outflow paths)

- Recommend daily water consumption quantity and cycle of sterilization process

by analyzing water consumption patterns

- Energy saving function activates by analyzing water purifier using patterns

-8-

Water

purifier

Air

purifier

Mattress

Detachable topper mattress (August)

- Release 6 types of detachable topper mattresses (Premium: 2 types, Standard: 4 types)

- Premium mattress with natural latex material (various topper types)

- Standard mattress with independent spring


2-2. Overseas business

[Unit: KRW bn]

Export revenue

-9-

Subsidiaries

ODM/Dealers

Export revenue KRW 35.8bn (+8.5% YoY)

- ODM/Dealer revenue KRW 15.9bn (-20.6% YoY, -15.5% QoQ)

: ODM air purifier sales decreased due to intensifying competition

and weak domestic consumption in China

ODM sales expect to increase in 4Q due to decrease of partners’

inventories and forthcoming peak season

- Subsidiaries revenue KRW 19.9bn (+53.3% YoY, -1.4% QoQ)

: Strong export driven by strong rental sales in major subsidiaries

Strong export to subsidiaries and subsidiaries revenue growth

Overseas subsidiary revenue

Continued growth of Malaysia, U.S. subsidiaries

- Malaysia revenue 3Q’15 +13.7% YoY, accounts 264k

- U.S. revenue 3Q’15 +35.0% YoY, accounts 92k

[Unit: KRW bn, Accounts]

3Q’14 3Q’15 3Q YTD’14 3Q YTD’15 2Q’15

3Q’14 3Q’15 3Q YTD’14 3Q YTD’15 2Q’15

24.7

21.7

264k

196k 23.3

14.2

10.5 92k

81k

13.6

[Malaysia Subsidiary]

[U.S. Subsidiary]

Revenue Accounts

Revenue Accounts

3Q’14 3Q’15 2Q’15

33.0

20.0

13.0

35.8

15.9

19.9

39.0

18.8

20.2


134.0

95.9

38.1

107.8

59.5

48.4

2-3. Home-care & Cosmetics business

-10-

[Unit: KRW bn]

Home-care

[Unit: KRW bn]

17.2

18.6

3Q’15 2Q’15 3Q’14

21.1 60.4 62.8


Cosmetics revenue KRW 18.6bn (+8.3% YoY)

- Continued growth of retail sales channel

(Home shopping +105.1% YoY, Department store 134.5% YoY)

Cosmetics

Home-care revenue +109.3% YoY

Cosmetics revenue +8.3% YoY

3Q’14 3Q’15 3Q YTD’14 3Q YTD’15 2Q’15

20.4

Continued growth of Home-care revenue

- Total accounts 254k (+28.1% YoY, +4.5% QoQ)

New Home-care sales system

- Concept: ‘Total Sleep Care Solution’ combined with

purchase, service and replacement

- Rental period: 3yr 5yr/ 6yr

- Service: 7-step care service Add topper replacement

- Revenue recognition: Financial lease1)

74.6

44.0

1) Financial lease: Record 5yr/ 6yr revenue at the time of the sales as present value

35.5

17.0

Enlargement of sales channels and brand renewal

- Diversify sales channels for Chinese customers

- Increase sales by renewal of Re:NK brand and change of

advertising model

14.8 14.8

Financial lease revenue

3. Consolidated earnings release

3Q’15 Revenue KRW 580.4 bn +10.4% YoY,

Operating Profit KRW 123.9 bn +30.1%, Net Profit KRW 92.4 bn +44.5% YoY

- Historically high Revenue, Operating Profit, Net Profit

Revenue Operating Profit Net Profit

-11-

[재무제표 기준]

[단위:십억원] 4Q'13 4Q'12 YoY 2013 2012 YoY

영업이익 87.6 35.6 145.7% 333.2 227.8 46.3%

(% of Revenue) 18.2% 7.7% 10.4%p 17.2% 12.6% 4.6%p

당기순이익 50.2 21.6 132.5% 253.2 119.7 111.4%

(% of Revenue) 10.4% 4.7% 5.7%p 13.1% 6.6% 6.5%p

[Accounting standard: K-IFRS Consolidated financial reports]

[Unit: KRW bn]

3Q’14 3Q’15

[Unit: KRW bn / : Margin]

63.9

3Q’14 3Q’15

525.5

12.2%

580.4

92.4

15.9%

2Q’15

555.3

2Q’15

82.7

14.9%

3Q’14 3Q’15 2Q’15

95.3

123.9 110.5

19.9% 21.4%

18.1%


1,617.4

1,683.9

282.7

334.7

19.9%

17.5%


12.1%

252.6

15.0%


196.3

[Unit: KRW bn / : Margin]

4. ‘15.3Q Review & 4Q Plan

3Q YTD’15 Review 4Q’15 Plan

-12-

Continued growth of health appliance business [Unit: KRW bn]


1,293.6

1,394.6

Two digit growth of operating profit

284.3

336.2

21.3%

18.8%


[Unit: KRW bn]

Continued growth of major subsidiaries

71.4

3Q YTD’15

[Malaysia Subsidiary]

3Q YTD’14

61.7 41.2

[U.S. Subsidiary]

31.7

Health appliance business

Strengthen product competitiveness

- IoT applied air purifier, deep sleep function

(using humidity and healing light) air purifier, ladies’ bidet,

new function added massage chair and etc.

- Increase ARPU and ASP by releasing new premium

rental and lump-sum products

Overseas business

Strengthen ODM/Dealers business

- Increase air purifier sales in China by entering peak season

and releasing new products

Enhance overseas subsidiaries business

- Malaysia subsidiary: Enlarge sales by expanding regions and

increasing sales forces

- U.S. subsidiary: Increase sales by expanding target customers

to Asian community and releasing new products

Lower cancellation rate

- Pre-intensive care of 3yr minimum rental period reaching

customers


Develop new ODM and Brand partners

[Unit: KRW bn]

Appendix

• Non-consolidated financial reports

• Consolidated financial reports

• Subsidiary results

-13-

Non-consolidated financial reports [Appendix]

[Unit: KRW bn]

Balance sheet Sep. ‘15 Dec. ‘14

<Asset> 1,678.2 1,576.0

Current Assets 607.4 573.1

Cash and cash

equivalents 90.3 105.5

Accounts receivable 312.8 273.6

Inventories 44.4 41.8

Non-current Assets 1,070.9 1,002.9

PPE 626.0 617.6

Affiliates and

subsidiaries 70.3 70.3

Intangible assets 146.3 147.8

<Liabilities> 497.2 517.0

Currents liabilities 425.5 468.0

Short-term borrowings 142.5 162.8

Debenture

(Less than 1 year) - -

Debenture

(More than 1 year) - -

Non-current liabilities 71.7 49.0

Long-term borrowings - -

Bonds - -

<Stockholder’s Equity> 1,181.0 1,059.0

Liability / Equity 42.1% 48.8%

Net debt / Equity 4.4% 5.4%

-14-

Income statement 3Q’15 3Q’14 YoY

Revenue 545.7 496.1 10.0%

COGS 168.7 162.5 3.8%

Gross profit 377.0 333.6 13.0%

SGnA 251.4 236.6 6.3%

Operating profit 125.6 97.0 29.5%

Margin(%) 23.0% 19.5% 3.5%p

Other income 9.8 2.8 249.5%

Other expenses 3.1 9.4 -66.9%

Financial income 0.3 0.7 -56.8%

Financial expense 0.9 2.8 -65.9%

Investment income

from investments in

affiliated company

- - -

Profit before income tax 131.6 88.2 49.2%

Corporate tax expenses 31.1 21.9 42.5%

Net profit 100.4 66.4 51.3%

Margin(%) 18.4% 13.4% 5.0%p

[Unit: KRW bn]

Consolidated financial reports

-15-

[Appendix]

Balance sheet Sep. ‘15 Dec. ‘14

<Asset> 1,700.1 1,621.6

Current Assets 602.1 596.8

Cash and cash

equivalents 116.5 147.4

Accounts receivable 227.9 208.8

Inventories 65.5 61.9

Non-current Assets 1,098.0 1,024.8

PPE 689.2 675.2

Intangible assets 169.1 170.6

<Liabilities> 552.0 582.2

Currents liabilities 466.8 526.0

Short-term borrowings 142.5 164.4

Debenture

(Less than 1 year) - -

Debenture

(More than 1 year) - -

Non-current liabilities 85.2 56.2

Long-term borrowings 5.8 0.9

Bonds - -

<Stockholder’s Equity> 1,148.1 1,039.4

Liability / Equity 48.1% 56.0%

Net debt / Equity 2.8% 1.7%

Income statement 3Q’15 3Q’14 YoY

Revenue 580.4 525.5 10.4%

COGS 178.1 168.2 5.8%

Gross profit 402.3 357.3 12.6%

SGnA 278.4 262.0 6.2%

Operating profit 123.9 95.3 30.1%

Margin(%) 21.4% 18.1% 3.2%p

Other income 10.4 3.6 52.9%

Other expenses 12.0 10.7 -14.0%

Financial income 0.3 0.7 -54.5%

Financial expense 1.0 2.9 -67.5%

Investment income

from investments in

affiliated company - - -

Profit before income tax 121.7 85.9 41.6%

Corporate tax expenses 29.4 22.0 33.4%

Net profit 92.4 63.9 44.5%

Margin(%) 15.9% 12.2% 3.7%p

[Unit: KRW bn] [Unit: KRW bn]

Malaysia

. 3Q’15 Revenue KRW 24.7 bn (+13.7% YoY, +6.0% QoQ)

. 3Q’15 Accounts 264,246 (3Q’14: 195,562)

. Rental gross adds increased due to enhancement of sales

organization and productivity

(Local currency basis : +25.9% YoY, +9.4% QoQ)

U.S

. 3Q’15 Revenue KRW 14.2 bn (+35.0% YoY, +4.4% QoQ)

. 3Q’15 Accounts 92,068 (3Q’14: 81,122)

. Revenue growth driven by increase of door-to-door and retail sales

(Amazon, etc.)

. 3Q’15 Revenue KRW 1.0 bn (-56.6% YoY, -71.0% QoQ)

. Air purifier sales decreased due to weak air pollution issue and weak

domestic consumption in China

. Sales growth decreased due to restructuring of business strategy and

sales organization.

-16-

China

Subsidiary 3Q’14 3Q’15 YoY 2Q’15 QoQ

Malaysia

Revenue 21.7 24.7 13.7% 23.3 6.0%

Operating profit 2.3 1.7 - 2.0 -

Margin 10.4% 7.0% 8.4%

U.S.

Revenue 10.5 14.2 35.0% 13.6 4.4%

Operating profit 0.2 -0.1 - -0.2 -

Margin 1.4% - -

China

Revenue 2.41) 1.0 -60.0% 3.3 -71.0%

Operating profit -0.4 -1.9 - -0.5 -

Margin - - -

Thailand

Revenue 2.3 1.7 -24.3% 1.7 1.8%

Operating profit -0.2 -0.0 - -0.2 -

Margin - - -

Green Entech

Revenue 3.8 16.0 321.2% 9.4 69.9%

Operating profit -1.1 0.5 - -0.5 -

Margin - 3.1% -

. 3Q’15 Revenue KRW 1.7 bn (-24.3% YoY, +1.8% QoQ)

. Narrowed deficit range due to decrease of SG&A cost

Thailand

. 3Q’15 Revenue KRW 16.0 bn (+321.2% YoY, +69.9%% QoQ)

. Revenue increased due to early progression in projects

Green Entech

1) Excluding 3Q’14 China subsidiary cosmetics business revenue.

Subsidiary results – 5 entities (4 overseas subsidiaries and Green Entech)

[Unit: KRW bn]

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