Brightpoint The Global Leader in the Wireless Value Chain

Brightpoint
The Global Leader in the Wireless Value Chain
May 2008
NasdaqGS
Ticker: CELL
Safe Harbor Statement
Certain statements in this presentation constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of
Brightpoint, Inc. to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risk
factors include, without limitation, uncertainties relating to customer plans and commitments, including, without limitation, (i) loss of significant customers or a
reduction in prices we charge these customers; Dobson Communications Corporation was recently acquired. In addition Rural Cellular Corporation (RCC) and Suncom
have recently announced plans to be acquired. The completion of any of these acquisitions may negatively impact our operating results. (ii) our significant payment
obligations under certain debt, lease and other contractual arrangements and our ability to reduce these obligations; (iii) possible adverse effect on demand for our
products resulting from consolidation of mobile operators; (iv) dependence upon principal suppliers and availability and price of wireless products including the risk of
consolidation of these suppliers; (v) our ability to borrow additional funds; (vi) possible difficulties collecting our accounts receivable; (vii) our ability to increase
volumes and maintain our margins; (viii) investment in and implementation of sophisticated information systems technologies and our reliance upon the proper
functioning of such systems; (ix) our ability to expand and implement our future growth strategy, including acquisitions; (x) uncertainty regarding future volatility in our
Common Stock price; (xi) uncertainty whether wireless equipment manufacturers and wireless network operators will continue to outsource aspects of their business to
us; (xii) our reliance upon third parties to manufacture products which we distribute and reliance upon their quality control procedures; (xiii) our operations may be
materially affected by fluctuations in regional demand and economic factors; (xiv) our ability to respond to rapid technological changes in the wireless communications
and data industry; (xv) access to or the cost of increasing amounts of capital, trade credit or other financing; (xvi) risks of foreign operations, including currency, trade
restrictions and political risks in our foreign markets; (xvii) effect of natural disasters, epidemics, hostilities or terrorist attacks on our operations; (xviii) our ability to
manage and sustain future growth at our historical or current rates; (xix) certain relationships and financings, which may provide us with minimal returns or losses on
our investments; (xx) the impact that seasonality may have on our business and results; (xxi) our ability to attract and retain qualified management and other
personnel, cost of complying with labor agreements and high rate of personnel turnover; (xxii) our ability to protect our proprietary information; (xxiii) our ability to
maintain adequate insurance at a reasonable cost; (xxiv) the potential issuance of additional equity, including our Common Stock, which could result in dilution of
existing shareholders and may have an adverse impact on the price of our Common Stock; (xxv) existence of anti-takeover measures; (xxvi) a substantial number of
shares will be eligible for future sale by Dangaard Holding and the sale of those shares could adversely affect our stock price; (xxvii) if we are not able to integrate
Dangaard Telecom’s operations in a timely manner, we may not realize anticipated benefits of the transaction in a timely fashion, or at all, and our business could be
harmed; (xxviii) we incurred significant financial obligations as a result of the acquisition of Dangaard Telecom, and our inability to satisfy these could materially and
adversely affect our operating results and financial condition and harm our business; (xxix) acquisition related accounting impairment and amortization charges may
delay and reduce our post-acquisition profitability; (xxx) exposure to unknown pre-existing liabilities of Dangaard Telecom could cause us to incur substantial financial
obligations and harm our business; (xxxi) possible adverse effects of future medical claims regarding the use of wireless devices; (xxxii) our ability to meet intense
industry competition. Because of the aforementioned uncertainties affecting our future operating results, past performance should not be considered to be a reliable
indicator of future performance, and investors should not use historical trends to anticipate future results or trends. The words “believe,” “expect,” “anticipate,”
“intend,” and “plan” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on any of these forward-looking
statements, which speak only as of the date that such statement was made. We undertake no obligation to update any forward-looking statement.
2
Corporate Profile
„ Founded:
1989
„ Headquarters:
Plainfield, Indiana
Operations in 27 countries
„ 2007 Revenue:
$ 4.3 Billion
„ 2007 Net Income:
$ 47.4 Million
„ 2007 Units Handled:
83 Million
„ Customers:
25,000+ B2B channels
3
Investment Considerations
„ World’s #1 value added wireless distributor & customized logistic services provider
„ Over 100 million wireless devices expected to be handled in 2008 (~ 8%-9%
global market share)
„ Unit growth rates exceed those of the wireless device industry
„ Solid growth drivers for wireless handset volumes in mature & emerging markets
„ The best expertise and value, at the most effective price points in the wireless
industry
„ SCALE – Successful integration of Dangaard and CellStar acquisitions
„ EXECUTION – Financially sound with compelling growth strategy
4
Global Presence
North America
Sweden
Finland
Norway
Denmark Netherlands
United Kingdom
PolandSlovakia
Belgium
Germany
France
Switzerland
Spain
Austria
Portugal
Italy
Russia
Dubai
India
Hong Kong
Philippines
Colombia
Singapore
South Africa
Australia
New Zealand
Presence in 27 Countries
Approximately 3,300 Employees Worldwide
5
Over 100 Million
Wireless devices expected to be
handled in 2008
6
Growing Faster than the Industry….
Brightpoint Growth in Handset Units
90
1400
83
CAGR = 43%
80
Global Industry Handset Units Sell-In
CAGR = 25%
1,150
1200
70
64
975
1000
60
800
50
800
42
40
600
27
30
672
470
400
20
20
200
10
0
0
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
Millions
7
Market Drivers
„ Wireless Device replacement cycle accelerating
¾ Accounts for approx 60% of global sell-in
„ Strong subscriber growth in emerging as well as mature markets
„ “Converged Devices” driving
Market Share
ASPs
Margins
¾ Estimated at 15%-20% of global units in 2008 versus 10%-15% in 2007
„ Smart phones increasingly replacing digital music players among consumers
„ Multimedia and new advanced networks (3G) driving new product & demand
¾ Email / Video / Internet Search / Mapping and more…
„ Multimedia phone shipments expected to surpass TV shipments in 2008
8
Business Overview
Our Business
“The last mile
in wireless
distribution
and
customized
logistic
services”
10
Business Focus Areas
11
Buy, Own & Sell
Buy from…
Sell to…
•
•
BUY IN BULK AND
RESELL IN
SMALLER
QUANTITIES
SINGLE SOURCE
Manufacturers
Manufacturers
(OEMs)
(OEMs)
Subscribers
MNO/MVNO
Retail
Channels
•
•
JIT INVENTORY
Independent
Dealers
CREDIT TERMS
TO CUSTOMERS
12
Buy, Own & Sell
Mobile Handsets
25,000+
25,000+B2B
B2B
Channels
Channels
Converged Devices
Mobile Enhancement
Personal Navigation Devices
Millions
Millionsof
ofEnd
End
Consumers
Consumers
13
Providing customers a world class
supply chain with a variable low cost
model. Do NOT Own Product.
Warehousing
Software provisioning
Packaging
Fulfillment
Credit, billing & collection
Mobile
MobileOperators
Operators
MVNOs
MVNOs
Suppliers
Suppliers
Call center and activation
Website hosting & e-fulfillment
Reverse logistics
Mass-retail connectivity via EDI
Procurement services
14
Seeking out new subscribers and
managing the activation process
In Activation Services, we develop new points-of-sale for our network
operator partners and create new revenue streams for our customers.
Enterprise
By utilizing Brightpoint, network operators are able to attain
incremental subscribers through secondary and non-traditional
channels. Brightpoint provides dealer recruitment and development,
sales training and support, commissions management, and
facilitates the processing of subscriptions. We service both
consumer and enterprise channels through Activation Services.
Channel
Aggregator
Incremental
Activations
National
Activation
Services
Alternative
Retail
Development
Consumer
15
Brightpoint Customers
25,000+ B2B Customers = Millions of End Users Worldwide
In 2008 Brightpoint Expects to Handle Over 100 million Wireless Devices
16
Brightpoint Growth Strategy
Geographic
Expansion
Building and
promoting our
brand equity
Greenfield or Acquisition
Expanding
product &
service
offerings in
current markets
Adding new
products and
services in
current markets
Focus on Converged Devices
Expanding scale and operating efficiencies
Building Shareholder Value
17
Financial Overview
Q1 2008 Financial Highlights
(Amounts in millions, except per share data)
Q1 08
Wireless devices handled
Change Fav/(Unfav)
Yr-over-Yr
Sequential
Q1 07
Q4 07
21.8
50%
(19%)
14.5
27.0
$1,195
86%
(27%)
$642
$1,630
Gross margin
7.3%
2.2 pts
0. pts
5.1%
7.3%
SG&A %
6.0%
(1.6 pts)
(1.5 pts)
4.4%
4.5%
Operating income from cont. ops.
$7.2
64%
(77%)
$4.4
$30.7
Income from continuing operations
$0.8
(59%)
(95%)
$1.8
$14.2
$0.01
(75%)
(94%)
$0.04
$0.17
$0.8
(58%)
(95%)
$1.9
$14.9
$0.01
(75%)
(94%)
$0.04
$0.18
28
(3)
(1)
25
27
Gross-debt-to-total-capitalization
37%
(5 pts)
6 pts
32%
43%
ROIC from operations
2%
(2 pts)
(8 pts)
4%
10%
Revenue
Per diluted share
Net income
Per diluted share
Cash conversion cycle (days)
NOTE: Net Income was negatively impacted for the three months ended March 31, 2008 by $1.3 million (pre-tax) loss in Slovakia related to the locally branded
notebook PC distribution model and $1.7 million (pre-tax) operating loss in the Middle East in which we resumed operations in August 2007. SG&A expenses
as a percent of revenue was negatively impacted by Dangaard Telecom operations including conforming Dangaard Telecom to Brightpoint accounting
policies. In addition, SG&A as a percent of revenue was negatively impacted by lower than expected revenue resulting from overall weakness in Europe
during mid to late March as well as supply constraints caused by snow storms in China.
19
Revenue
Q1 2008 revenue up 86% year-over-year
$1600M
1600
1400
$1200M
$1178M
1200
$851M
1000
800
$565M
$634M
$677M
$642M
$550M
600
400
200
0
Q1 2006
Q2 2006
Q3 2006
Q4 2006
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Q1 2008
20
Wireless Devices Handled Mix Shift
(Amounts represent percentage of wireless devices handled by service line)
90%
Distribution
(Product-based transaction)
80%
70%
30% 34%
70% 66%
28%
28%
24%
76%
23%
77%
21%
79%
High Revenue
Sensitivity
24%
27%
27% 28%
34%
73% 76%
33% 29%
73% 72%
72%
66%
72%
67%
71%
60%
Low Revenue
Sensitivity
Logistics Services
50%
(Service fee-based transaction)
08
Q1
07
Q4
07
Q3
07
Q2
07
Q1
06
Q4
06
Q3
06
Q2
06
Q1
05
Q4
05
Q3
05
Q2
05
Q1
Q4
04
40%
21
Statements of Operations Summary
(Amounts in millions, except per share data)
Q2 06
Q3 06
Q4 06
Q1 07
Q2 07
Q3 07
Q4 07
Q1 08
Revenue
$550
$634
$677
$642
$851
$1,178
$1,630
$1,195
Gross profit
$35.7
$37.0
$41.8
$32.7
$41.6
$78.0
$118.2
$87.3
Gross margin
6.5%
5.8%
6.2%
5.1%
4.9%
6.6%
7.3%
7.3%
SG&A expenses
$24.4
$24.5
$29.8
$28.3
$32.7
$51.4
$73.1
$71.8
SG&A %
4.4%
3.9%
4.4%
4.4%
3.8%
4.4%
4.5%
6.0%
Operating income
$11.3
$12.5
$12.0
$4.4
$8.2
$22.6
$30.7
$7.2
Operating margin
2.1%
2.0%
1.8%
0.7%
1.0%
1.9%
1.9%
0.6%
Income from continuing
ops. per diluted share
$0.16
$0.18
$0.20
$0.04
$0.35
$0.18
$0.17
$0.01
22
Balance Sheet Summary
(Amounts in millions)
Cash
A/R
Inventory
Other current assets
Total current assets
Fixed and other assets
Total assets
Current & other liabilities
st borrowings
lt borrowings
Other lt liabilities
Minority Interest
Total liabilities
Equity
Total liabilities & equity
Q2 06
$83
182
139
48
452
42
$494
Q3 06
$104
206
287
46
644
44
$687
Q4 06
$54
228
392
53
727
52
$779
Q1 07
$49
260
354
52
717
116
$833
Q2 07
$44
303
258
45
650
138
$788
Q3 07
$65
617
419
59
1,163
590
$1,753
Q4 07
$103
751
475
72
1,402
571
$1,973
Q1 08
$91
575
471
74
1,212
603
$1,815
$317
0
0
12
0
$329
165
$494
$498
0
0
12
0
$510
177
$687
$554
14
4
12
0
$584
195
$779
$524
9
86
14
0
$633
200
$833
$450
11
84
14
0
$559
229
$788
$727
97
280
48
1
$1,153
600
$1,753
$856
19
441
55
1
$1,372
601
$1,973
$738
22
356
60
1
$1,177
638
$1,815
23
Why Invest in Brightpoint?
„ World’s #1 value added wireless distributor & customized logistics services provider
„ Over 100 million wireless devices expected to be handled in 2008 (~8%-9%
global market share)
„ Unit growth rates exceed those of the wireless device industry
„ Solid growth drivers for wireless handset volumes in mature & emerging markets
„ The best expertise and value, at effective price points in the wireless industry
„ Cash Flow from operations providing significant leverage for debt reduction
„ Financially sound with compelling growth strategy
24
Brightpoint, Inc. Investor Relations
Mr. Anurag Gupta
SVP - Global Strategy, Investor and Public Relations
1.877.IIR.CELL / 1.877.447.2355
[email protected]
www.brightpoint.com