On the third day of ISE last week, with little fanfare, Barco announced its 2019 earnings report while also commenting on how they think 2020 will play out. As we have very few publicly traded companies of this magnitude in the commercial AV space, I always appreciate Barco’s earnings report as it’s become a bellwether for how the industry is doing. It’s tracked pretty accurately in recent years — since 2013, for sure.
So, let me break it down for you and give you my take too.
In 2019, Barco saw an increase in revenue of nearly 10% from 2018. They saw a tiny bit over $1.2 billion in sales for 2019 and experienced the most substantial growth in digital cinema and healthcare. But, its ProAV products (including ClickShare and projectors) posted gains of about 7% for the year. This is substantial, in my opinion, as there is a definite shift from projectors to flat panels and a small shift to LEDs (but that hasn’t been totally realized due to the disparity of pricing between projectors and LEDs). More on that in my 2020 outlook of Barco’s forward-looking statements regarding its own 2020 predictions. Another reason this is significant is that three companies have aimed at Barco’s leadership position in the wireless airing market (i.e., ClickShare), including Crestron, Vivitek and Extron. And, while they are taking market share away from Barco, the market itself seems to be still growing, so it’s not really adversely affecting Barco at the moment.
When it comes to Barco’s 2020 outlook (remember, it’s a public company, so it has to be very conservative with statements about future trends), it says that the first half of the year will be negatively impacted by the COVID-19 virus (formerly known as the new coronavirus) due to the company’s reliance on China. This may affect sales as China is upgrading its movie theaters right now to be 4K, but, merely likely, Barco sees a production hit in China and the area due to the shut-down of companies. For example, you may recall that Barco owns a large part of Unilumin, headquartered in Shenzhen, China. And the company is making the most of the ClickShare product (including the new ClickShare Conference) in China and Taiwan. So, even though demand may be high, if Barco can’t make it, Barco can’t shift it. The company is careful not to quantify this impact in its results announcement. But, clearly, the longer that much of China is shut down, the longer this impact will have on Barco.
But the company specifically stated that the second half of the year is going to be good for it, and Barco even stated that “management expects a mid+ single-digit top-line growth and an improvement in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margin toward 15%.”
Why is this important? Well, in 2019, it had EBITDA of 22%, so 15% would realize an 8% decline, in reality. I suspect half of this is projected COVID-19 impact, and half is competitive encroachment. In fact, at ISE 2020, we noticed an aggressive campaign to unseat the ClickShare from a few companies on the show floor, most notably ScreenBeam, Vivitek and a small start-up called UC Workspace that’s created a software-only sharing tool called WEAV that can be integrated on any device with a Mac, Windows PC or Android computer — thin-client or computer-based.
Even with its lower predictions, if the industry grows 8% in 2020, that will trump 2019’s growth so, it appears to be a good year ahead — even with perhaps a long work-stoppage in China.