Barco Sales Decline 18% in First Half of 2020; Not Surprising Considering COVID-19 Impact

Barco Financials Presentation_2020

There aren’t many public companies in our industry that only do AV. For example, familiar names like Cisco (NASDAQ: CSCO), Logitech (NASDAQ: LOGI) and Poly (NYSE: PLT; formerly Plantronics and Polycom) are also public, but they have many offerings aside from ProAV. Belgium-based Barco is a $1 billion+ company that does ProAV exclusively — specializing in display, projection and image processing, among other adjacent capabilities.

Barco announced its financial results Thursday for the first six months of 2020 (1H20), through June 30, 2020. The results were delivered live in a press conference with CEO Jan De Witte, CFO Ann Desender and vice president of investor relations Carl Vanden Bussche. Per the announcement, “The company responded well to the challenges associated with COVID-19 and leveraged its organizational effectiveness and agility to move forward.”

First half of 2020 financial highlights:

  • Incoming orders at 398.7 million euro (-25%)
  • Orderbook at 317.2 million euro, in line with year-end 2019
  • Sales at 407.2 million euro (-18%)
  • EBITDA of 40.7 million euro (-26.9 million euro) or 10% of sales (-3.6 ppts)
  • Net income at 10.4 million euro (-32.7 million euro), including 8.1 million euro restructuring charges and impairments

After reading through the report (aided by Barco’s accompanying presentation deck), here are some points that stood out — some context that might provide color to the numbers:

Executive Summary_Barco

Image: Barco Results 1H20 Presentation; July 16, 2020

  • Barco’s first-half-of-2020 sales were significantly below last year — but all this seems pretty expected given COVID-19’s impact on world economies, especially earlier this year and especially on the entertainment and enterprise fronts. Things like cinema and event projectors saw a significant drop, but fixed installs showed signs of recovery on a region-by-region basis as countries started opening up their businesses and economies. Demand was weakened significantly in April and May as companies around the world complied with lockdown requirements.
  • In June, business began to pick up gradually toward the end of the second quarter. Some of the losses in entertainment and corporate were offset by Barco’s growth in healthcare (e.g., sustained demand in diagnostic imaging).
  • To mitigate the adverse impacts of revenue decline, Barco reduced “indirect costs by 15% versus last year through a broad cost containment program.” Cost-savings measures included: discretionary spending, aligning activity levels with market realities (e.g., pushing out certain R&D projects) and “protecting strategic investment priorities.” Of note: Barco has decided to close its Taiwan factory and outsource UniSee LCM (Liquid Crystal Module) components in the second half of 2020.
  • Barco mentioned that it’s leveraging the heightened need for remote collaboration solutions. We suspect that means Barco will push its digital connectivity solutions like the new ClickShare Conference (successfully launched in January), weConnect, Synergi and diagnostic displays.
  • Barco management expects Q2 will be the weakest quarter of the year but predicts steady quarter-over-quarter improvement during the second half of the year — though with different dynamics across the company portfolio.
  • Based on 2020’s quarterly progression so far, Barco is planning to develop a 2021 budget “with a cost base no higher than 2019 group level.”
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Barco CEO Jan De Witte commented, “During this extraordinary time, our priority has been on supporting our employees, customers, and partners, and on ensuring business continuity.”

Barco Outlook

Image: Barco Results 1H20 Presentation; July 16, 2020

“The agility that has been built in our organization enabled us to respond in a timely manner and adjust activity and cost levels to the significant decline in sales, protecting gross profit margin and mitigating impact on indirect expenses, while sharpening the commercial focus on new remote collaboration solutions,” De Witte continued.

Barco’s executive summary and press release can be found here. (At the bottom of the release, you can find a PDF download that breaks down the numbers in comparison to previous quarters.)