Third Quarter of FY 2016 Consolidated Financial Results ... · Third Quarter of FY 2016 Consolidated Financial Results Japan Display Inc. February 8, 2017

Third Quarter of FY 2016

Consolidated Financial Results

Japan Display Inc.

February 8, 2017

2 Copyright © 2017 Japan Display Inc. All Rights Reserved.

Note about terms in this presentation: ・ Depreciation costs include amortization of goodwill and non-operating depreciation ・ Research and development costs are the total of R&D costs included in COGS and R&D costs in SG&A.

1. Reform Results & Progress

2. 3Q-FY16 Results & 4Q Guidance

3. Technology Development Update


Reform Results & Progress

Mitsuru Homma

Chairman and Chief Executive Officer


Summary of 3Q-FY16 Results & FY16 Full-Term Forecast

(Billion yen)（億円）

FY16 Full year

（Forecast）

Net sales 305.0 273.2 644.2 230.0 874.2

Operating income 13.3 12.7 10.5 12.5 23.0

4.4% 4.6% 1.6% 5.4% 2.6%

Ordinary income (loss) 8.2 11.5 (9.1) - -2.7% 4.2% -1.4%

EBITDA 33.0 33.8 69.1 - -10.8% 12.4% 10.7%

Contribution margin 23.7% 30.5% - - -

Avg. FX rate (\/US$) 121.5 109.4 106.6 110.0 107.5

4Q FY16

（Forecast）3Q FY15 3Q FY16 1-3Q FY16

3Q-FY16 : Lower sales YoY due partly to forex impact, but earnings margin greatly improved on back of strengthened CRM & Shenzhen Development Ctr customer support program that leveraged our technology strengths & severe mfg cost improvements. Structural reforms made JDI more resilient & led to higher earnings.


Reforms Implemented to Date

3Q15 4Q15 1Q16 2Q16 3Q16

Inc earnings by lowering BEP

【Bre

ak-e

ven sa

les

】

1. Mgmt reforms → Operating cost reforms Strengthen basic structure of

business to enhance market competitiveness

2. Structural reforms Streamline non-competitive assets, cut fixed costs

Higashiura Plant Mar 2016: Fab 1 write down Apr 2016: Operation shutdown

Mobara V3 line Mar 2016: Write down Dec 2016: Operation shutdown

Taiwan biz reorg Nov 2016: STC delisted Jan 2017: MOZ assets sold

Labor cost cuts Employee reductions (domestic/overseas)

(vs 3Q-FY15) Y43bn lower

3. Business structural reforms Higher earnings via development of non-mobile business

・Automotive biz expansion “Road to Y300bn”

・Grow/commercialize new biz

・Expanded technology portfolio

CRM reforms Better sales results from stronger relations with China’s 3 major makers; build broad support system for new technology/product concepts to expand share in high-end models (≧FHD).

Lower sales BEP


Orders from multiple customers

Nonmobile ratio* 54%+ ~20% 33%

Progress of Business Structural Reforms FY16 FY17 FY18 FY21

2in1 Note PC

VR/AR

Auto- motive

1Q17 start of mass mfg shipments


3-fold business growth

Industrial Signage 3Q17 start of mass

mfg shipments

Orders from multiple customers

Product development Biz deal talks

Medical Strategic co-development

Education

FY21 sales

approx. Y250bn

FY21 sales

approx. Y300bn

LTPS Larger, sheet-like

Pixel Eyes™

Low-power consump.

High res, slim border Pixel Eyes™

High-res 651ppi →800ppi

High-speed response

Reflective e-paper

Medical monitor 8K high-res, Partnerships

Education tablets Low-power consump. Stylus, Pixel Eyes™

*Ratio of sheet inputs



Product development Biz deal talks


3Q-FY16 Results & 4Q Guidance

Keiichi Yoshida

Chief Financial Officer


3Q-FY16 Highlights

3Q: Strong sales; cost reductions & weaker yen surpassed assumptions, so sales & op income above Nov 9 forecast.

YoY: Sales lower due to stronger yen etc. but mgmt/structural reforms deliver nearly unchanged op income.

Forex loss (non-operating) last year became gain this year in 3Q, giving ordinary income & net income a push up YoY.

Dec 21: Announcement of Y75bn funds procurement, an investment in growth

Dec 23: Start of mass mfg at Hakusan Plant (Billion Yen)

Net

sales

Operating

income

Ordinary

income

Net

income

Dep. &

Amort.

R&D

expense

FX rate

(\/US$)

3Q-FY16 (A) 273.2 12.7 11.5 7.3 23.5 3.0 109.4

3Q-FY16 (F) 265.0 10.0 - - 21.7 4.8 105.0

3Q-FY15 (A) 305.0 13.3 8.2 4.7 20.3 3.9 121.5


3Q-FY2016 Financial Results

(Billion yen)

Q3-FY16 Q3-FY15 Q2-FY16

Net sales 273.2 305.0 (31.8) －10.4% 196.6 +76.6 ＋38.9%

Cost of sales 246.5 278.8 (32.3) 183.5 +63.0

Gross profit 26.7 26.1 +0.6 ＋2.0% 13.1 +13.6 ＋103.6%

9.8% 8.6% 6.7%

SG&A 14.0 12.8 +1.2 11.9 +2.1

Operating income 12.7 13.3 (0.6) －5.1% 1.2 +11.5 ＋924.4%

4.6% 4.4% 0.6%

Net non-operating loss (1.1) (5.1) +4.0 (7.6) +6.5

Ordinary income (loss) 11.5 8.2 +3.3 ＋40.0% (6.3) +17.8 -

4.2% 2.7% -3.2%

Net extraordinary income (loss) 0.0 (1.1) +1.1 0.0 +0.0

Income (loss) before tax 11.5 7.1 +4.4 ＋61.6% (6.3) +17.8 -

4.2% 2.3% -3.2%

Net income (loss) 7.3 4.7 +2.6 ＋54.2% (4.9) +12.2 -

2.7% 1.6% -2.5%

EBITDA 33.8 33.0 +0.8 ＋2.6% 20.3 +13.5 ＋66.4%

12.4% 10.8% 10.3%

Avg. FX rate (JPY/USD) 109.4 121.5 102.4

Q-End FX rate (JPY/USD) 116.5 120.6 101.1

QoQ Chg.YoYChg.


Operating Results (9 mo. ended Dec. 31, 2016)

9 mo. ended

Dec.31, 2015

Net sales 644.2 812.8 (168.6) －20.8%

Cost of sales 596.0 744.2 (148.2)

Gross profit 48.2 68.6 (20.5) －29.8%

7.5% 8.4%

SG&A 37.7 44.7 (7.0)

Operating income 10.5 23.9 (13.4) －56.2%

1.6% 2.9%

Net non-operating loss (19.5) (14.0) (5.5)

Ordinary income income (loss) (9.1) 9.9 (18.9) -

-1.4% 1.2%

Net extraordinary loss (1.6) (1.1) (0.5)

Incom (loss) before tax (10.7) 8.8 (19.5) -

-1.7% 1.1%

Net income (loss) (9.4) 4.4 (13.8) -

-1.5% 0.5%

EBITDA 69.1 83.8 (14.7) －17.5%

10.7% 10.3%

Avg. FX rate (JPY/USD) 106.6 121.7

9 mo. ended

Dec.31, 2016

(Billion yen)

YoY Chg.


10.0

12.7

-2.5 +0.9

+2.8

+1.5

(Billion yen)

Shipments & product mix

Fixed costs

Variable costs

FX

3Q-FY16 Operating Profit Change Factors

3Q16 forecast

3Q16 actual

vs. November 9 forecast vs. 2Q16 (Previous quarter)

1.2

12.7

+15.8

+8.3 -7.7

+2.6

-7.5

(Billion yen) Variable costs

Fixed costs

Inventories, others

FX

Shipments & product mix

3Q16 actual

2Q16 actual


Balance Sheet (Billion yen)

12/2016 9/2016 3/2016

　 Cash and deposits 82.2 72.7 55.1

Accounts receivable 129.8 81.3 80.7

Other receivables 112.0 103.0 57.1

Inventories 110.2 109.2 114.1

Others 19.9 26.6 15.8

Total current assets 454.2 392.9 322.8

Non-current assets 531.1 516.8 491.0

Total assets 985.3 909.7 813.9

Accounts payable 273.9 226.7 138.1

Interest-bearing debt 93.4 55.3 77.3

Advance payments 184.4 190.9 131.9

Other liabilities 79.4 93.2 101.3

Total liabilities 631.1 566.1 448.6

Total net assets 354.2 343.6 365.2

Shareholders' equity ratio 35.7% 37.5% 44.6%

Net debt 11.2 (17.4) 22.2

Merchandise and finished goods 14 14 28

Work in process 16 25 21

Raw materials and supplies 7 11 10

Days in inventory 36 50 58


Cash Flows

(1) Working capital = Accounts receivable + Inventories + Accounts payable + Other receivables (2) Free cash flow = Cash flow from operating activities + Cash flow from investing activities

(Billion yen)

9 mo. ended

Dec.31, 2016

9 mo. ended

Dec.31, 2015

Increase/

Decrease

Income before income taxes (10.7) 8.8 (19.5)

Depreciation and amortization 65.0 60.7 4.3

Working capital (1) 33.8 25.9 7.9

Advance receipts 52.5 47.5 5.0

Other (2.6) 1.0 (3.6)

Cash flow from operating activities 138.0 143.9 (5.9)

Acquisitions of property and equipment (116.6) (112.3) (4.3)

Other (11.3) 3.6 (14.9)

Cash flow from investing activities (127.9) (108.7) (19.2)

Cash flow from financing activities 14.0 (9.2) 23.2

Ending balance, cash and equivalents 82.2 120.0 (37.8)

Free cash flow (2) 10.1 35.2 (25.1)


4Q-FY16 Guidance

• Sales: Seasonal factors to mean lower sales QoQ; however, expect much higher sales YoY.

• Sales lower (QoQ) & fixed costs higher with start of mass mfg at Hakusan. However, expect approx same op. income based on more improvement in contribution margin & changed product mix etc.

• Full term: Lower sales, stronger yen & higher fixed costs to be offset by reforms, so expect higher op. income.

4Q-FY16

Guidance

・ 4Q-FY16 forex impact (vs $US): 1 yen change => Y600m/quarter

(Billion Yen)

Net

sales

Operating

income

Ordinary

income

Net

income

Dep. &

Amort.

R&D

expense

FX rate

(\/US$)

4Q-FY16 (F) 230.0 12.5 - - 26.9 8.2 110.0

3Q-FY16 (A) 273.2 12.7 11.5 7.3 23.5 3.0 109.4

4Q-FY15 (A) 176.3 (7.2) (22.8) (36.3) 20.1 6.7 115.4

FY16 (F) 874.2 23.0 - - 91.9 18.2 107.5

FY15 (A) 989.1 16.7 (12.9) (31.8) 80.9 23.3 120.1


Technology Development Update

Shuji Aruga

President & Chief Operating Officer


Quarterly Sales by Product Category & by Customer Region

0

500

1,000

1,500

2,000

2,500

3,000

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16F

（yen bn）

US/Europe

China Other Automotive

& non-mobile category

Mobile category

3Q16: Lower YoY but ≈40% higher QoQ; higher China mkt share gave big QoQ boost

4Q16: Expect typically lower total sales vs 3Q yet look for continued growth of China sales

1Q17: Lower sales QoQ due to seasonal factors but YoY improvement expected

(FY)


Smartphone Market Trends

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

0

100

200

300

400

500

600

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16F

YoY growth +5%

（M

illion）

Media report strong New Year holiday smartphone sales.

Surveys of Chinese stores indicate that post-New Year demand is also strong; overall, demand conditions appear favorable.

Chinese New Year

Sales

Global smartphone shipments

Solid demand in Asia, expect positive YoY growth in 4Q-FY16.

Above-mkt rate growth expected for JDI's major customers.

(FY)

JDI Custo- mers*

Other

Sources for chart: Strategy Analytics (Feb 2017); 4Q-FY16 & growth rates are JDI estimates

*Definition of JDI customer: Customers for which JDI generally has a sales share of 5% or more.


Envisioned applications

Reflective LCD

“FULL ACTIVE”

Thinness

High-speed response

Pixel Eyes™・Sensing

MIP

Flexible

E-paper

Ultra high res.

OLED

Evaporation

Printing

With platform core technology as base => expand applications & business

Signage Automotive

Smartphone Aviation/ Medical

Book/ Education

Gaming PC VR/AR

2in1 PC TV

Pla

tform

tech

nolo

gy

4-side bezel free/ Non-rectangular

Low-power consump

Platform Technology That Supports Growth


Platform Evolution

Establish technology portfolio that can adapt to various applications and substantially elevate display designability

FULL ACTIVE™ FLEX FULL ACTIVE™ Evaporation OLED

Film substrate display Glass substrate display

(Mass mfg phase) (Pilot development phase) (Pilot development phase)


Notebook PC Displays

■ LTPS technology integrated with notebook PC displays

Long battery

life

Thin Light Small

Bright screen

Panel size 13.26”

Resolution 4K2K (332ppi)

Panel border (L/R/T/B) 2.0/2.0/2.0/6.1 mm

Module thickness 2.15mm

Power consumption 4.7W (LCD+B/L) ＠ Gamut72%, 400cd/m2

Specs

Features


Technology to Achieve HMD VR Panels

■ To enable better immersion

Less delay

Enhanced reality

More Comfort- able fit

Higher resolution 650ppi → 800ppi

Less screen door effect High aperture ratio

Narrow edge “FULL ACTIVE”

Thin & bendable

High refresh rate 90Hz → 120Hz

Greater moving image response speed -High refresh rate

-High-speed response liquid crystal for VR

-Blinking backlight

Less moving Image

blurring

400ppi 651ppi


Securing OLED Technology

Evaporation OLED • Sampling verification at pilot line in order to provide

customer-specific technology & products

• At the technology & process acquisition stage, proceed to mass mfg. phase based on finalizing agreements with partners

Printing OLED

• Plan to seal final agreement with JOLED by end-FY16 following due diligence


Forward Looking Statement:

Any information related to market trends or industries mentioned in this document is based on information available at present and JDI does not guarantee that this information is accurate or complete.

Any plan, estimation, calculation, quotation, evaluation, prediction, expectation or other forward-looking information in this document is based on the current assumptions and beliefs of JDI in light of the information currently available to it, and involves known and unknown risks, uncertainties, and other factors. Such risks, uncertainties and other factors may cause JDI’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, without limitation: economic conditions and individual consumption trends in Japan and overseas, currency exchange rate movements, trends in the market for smartphones and other electronic equipment, the management policies of our major business partners and fluctuations in the price of raw materials.

Documents

Third Quarter of FY 2016 Consolidated Financial Results ... · Third Quarter of FY 2016 Consolidated Financial Results Japan Display Inc. February 8, 2017