2009 Report. Apr 2010

(1)

2009 Report

2010 O tl k

2010 Outlook

(2)

1. Turnaround strategy

L

i

t

hi

- Leveraging partnerships

- Expanding to 3 product lines (2 new)

F

R&D A d id & PC t bl t

- Focus R&D on Android & PC tablets

2. 2009

3 Q1 2010

3. Q1 2010

(3)

2007-2009 ARCHOS niched in high-end >300€

F 2007 t 2009 ARCHOS i hi h d f k t ith d t 300€ From 2007 to 2009, ARCHOS was in high-end of market with products > 300€

Niched in high-end price segment representing less than 10 % of the overall market

4 2 3 4 t si ze B€ 1 2 Se gm en t 0 0 50 100 150 200 250 300 350 400 Price segmentation €

(4)

Expand the Product Range by leveraging

P

hi

i h Chi

ODM

Up to 2008

Partnerships with Chinese ODMs

• Up to 2008…

–

All developments: IN HOUSE

INDUSTRIAL DESIGN ARCHITECTURE HARDWARE DEVELOPMENT SOFTWARE DEVELOPMENT MANUFACTURING QUALITY CONTROL

• Starting Q4 2008…

–

Most innovative developments : IN HOUSE

INDUSTRIAL DESIGN ARCHITECTURE HARDWARE DEVELOPMENT SOFTWARE DEVELOPMENT MANUFACTURING QUALITY CONTROL

• Other developments : PARTNERSHIP

QUALITY INDUSTRIAL DESIGN ARCHITECTURE HARDWARE DEVELOPMENT SOFTWARE DEVELOPMENT MANUFACTURING QUALITY CONTROL

(5)

Expand the Product Range by launching

2 d

li

2 new product lines

ENTERTAINMENT

Positioning

MOBILITY CONNECTIVITY

3 markets, 3 product lines

Internet Tablets

_Netbooks

Internet Tablets

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Expanding the range by focusing R&D on

A d id I

T bl

& PC T bl

Android Internet Tablets & PC Tablets

1st to introduce Android tablets in September 2009

Best Multimedia experience with Android

ARCHOS Multimedia

Google Android

• HD Video - Music - Photos

• TV Recording

• Web TV & Web Radio

• Standard & Open System

• Web browsing

• Email

• Web TV & Web Radio

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Outcome of turnaround strategy

Product range considerably expanded between 2008 and 2010

<100€

100€ 200€ 200€ 300€

>300€

2009

2008

<100€

100€ - 200€ 200€ - 300€

>300€

2010

MP3/MP4 I t t Internet Tablets Netbooks

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1 T

d t t

1. Turnaround strategy

2. 2009

- 2009 achievements

- P&L and Balance Sheet

P&L and Balance Sheet

- Conclusions

3. Q1 2010

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2009 achievements

• Innovation : introduce 1st _{Internet & PC Tablets} Turnaround • Diversify product range to entry level MP3/MP4

• Penetrate PC Shelf with PC Tablets & Netbooks

Ch M f t i f i t t t k Gross Margin

• Change Manufacturing from consignment to turnkey • Leverage partnerships with Chinese ODM’s

• Restore 20 23 % Gross margin in line with industry • Restore 20 - 23 % Gross margin in line with industry

Operating Expenses

• Decreased OPEX along with revenue • Built up competence center in China

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Profit & Loss Statement (M€)

M€ FY 2009 FY 2008 Δ % / M€ Comments

Net Sales 57,9 73,9 (21,6%)

Net sales impacted by a product range too concentrated and high-end (>300€) and cash restrictions in Q4

Gross Margin 7,8 10,1 (22,7%) Gross margin impacted by cash constraint % GM / Net Sales 13,5% 13,7%

Operating Expenses 18,7 24,3 (22,8%) Significant cut in support functions

Current Operating income (10 9) (14 1) +3 2 Current Operating income (10,9) (14,1) +3,2

Financial costs (1,3) (3,5) +2,2 Mainly Echostar Corporation interest on debt

Non recurring expenses (6,3) - (6,3) Change of strategy to turnkey implied exceptionnal depreciation of all non finished products inventory

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Year End Balance sheet

Assets Liabilities

Fixed assets & other non current

assets 6,5 Equity 30,2

Deffered taxes 14 9 Echostar debt 6 4 Deffered taxes 14,9 Echostar debt 6,4 Cash on hand 20,8 Bank debt 5,1 In entor 11 4 Factors liabilities 3 3 Inventory 11,4 Factors liabilities 3,3 Trade receivables 12,0 Trade payables 11,3 Suppliers advance paiements 3,7 Accruals and credits to customers 5,7 Tax & social receivables 3,8 Tax & social liabilities 6 Others receivables 1,1 Others liabilities 6,2

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Conclusions

2008 & 2009 mainly impacted by New strategy fully implemented in 2010

2010

• Niched above 300 € • Company covers large range from 30€ to

500 €

• Covered only 1 market segment • Coverage of 3 growing segments with

right entry barriers

• Consignement manufacturing • Full turnkey and no more Material costs in

the B/S

• Expenses down from 28M€ in 2007 to Expenses down from 28M€ in 2007 to • Company aiming at reducing its operating

24,3M€ in 2008 and 18,7M€ in 2009

Company aiming at reducing its operating expenses

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1. Turnaround strategy

2. 2009 Report

3. Q1 2010

- Q1 Report

- Breakeven point

p

4. What’s next

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Q1 2010: strategy starting to pay off

M€ Q1 2010 Q1 2009 Δ % EUROPE 11,3 9,7 +16,6% USA 3,0 2,4 +24,9% ASIA 0 8 1 0 20 5% ASIA 0,8 1,0 - 20,5% TOTAL 15,1 13,1 + 15,3%

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ARCHOS Simulation of break-even point

Revenue

Revenue 80M€ 100%

Revenue

1. Expanded tablet range

2. Developed MP3/MP4 and Netbooks range 3. Expand in Italy and Spain

4 New Chinese partnerships 4. New Chinese partnerships…

Gross Margin 16M€ 20%

Gross Margin

1. New china partnerships, improved competitivity 2. Turnkey model versus consignement

3. Increased rotation of product range and better product life cycle Operating expenses 1 ¼ R& D Operating Expenses 16M€ 20% 1. ¼ R& D 2. ¼ Sales 3. ¼ Marketing 4. ¼ Support functions Operating Results 0M€ 0%

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1 T

d t t

1. Turnaround strategy

2. 2009

3 Q1 2010

3. Q1 2010

4. What’s next

- Renew entire MP3/MP4 range

- Home Tablets

R

i

PC T bl t

- Revamping PC Tablet

- Gen 8 of Internet Tablets

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Complete redeployment of product range

Full product range covering all price segments from 30€ to 500€

<100€

100€ 200€ 200€ 300€

>300€

<100€

100€ - 200€ 200€ - 300€

>300€

2010

MP3/MP4 I t t Internet Tablets Netbooks

(18)

Full range of MP3/MP4 players

Target: renewing entire range before year’s end

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Just introduced ARCHOS Home Tablets

Simple Android tablets for the home

Ultra Low Cost: 150€ to 200€

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Revamping ARCHOS 9 PC tablet

16 lt thi 16 mm ultra-thin

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To come: Gen 8 of Internet Tablets

Lineup of 6 new Internet tablets Screen size from 3” to 10”

Retail prices ranging from 100€ to 350€e a p ces a g g o 00€ o 350€

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S f h b t t t Safe harbour statement

ARCHOS is a company listed on NYSE Euronext Paris, and this presentation t i t i t t t th t tit t "f d l ki t t t ” S h contains certain statements that constitute "forward‐looking statements”. Such forward‐looking statements are based on management's current expectations and beliefs and are subject to a number of risks, uncertainties, assumptions and other factors beyond ARCHOS’s control that could cause actual results to and other factors beyond ARCHOS s control that could cause actual results to differ materially from the future results expressed, forecasted or implied by such forward‐looking statements due to changes in global economic and business forward conditions and risks related to its operations in general.

For further and more detailed financial information and informations regarding the risks please refer to the company’s documentation registered and

d b th F h t k k t th iti “A t ité d M hé

approved by the French stock market authorities “Autorité des Marchés Financiers”.