Barco : Results 3Q20 Presentation

Results 3Q20

Analyst & Investor call

Soft 3Q20 with mix of recovery and prolonged covid impact

Jan De Witte & Ann Desender

21 October 2020

PRELIMINARY NOTES

Safe harbor statement

This deliverable may contain forward-looking statements. Such statements reflect the current views of management regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Barco is providing the information as of this date and does not undertake any obligation to update any forward-looking statements contained in this deliverable in light of new information, future events or otherwise.

Barco disclaims any liability for statements made or published by third parties and does not undertake any obligation to correct inaccurate data, information, conclusions or opinions published by third parties in relation to this or any other deliverable issued by Barco.

Glossary

All definitions for Alternative Performance Measures (APM's) are available in the Glossary of the Half Year

Report and on the investor portal (www.barco.com/en/about-barco/investors)

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AGENDA

1. Exec Summary
2. Results
3. Zoom in on Cinema & ClickShare
4. We remain committed to our strategic journey
5. Navigating 2020 & beyond
6. Q&A

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RESULTS 3Q20 | EXECUTIVE SUMMARY

Q3 in-line with Q2 with mix of recovery and prolonged covid impact

Entertainment flat as anticipated

Solid signs of recovery vs Q2 for Enterprise, fueled by EMEA & APAC on increased economic activity and back-to-office trends

Covid-pandemic outbreaks caused hospitals to postpone short term investments and led to weaker than expected Healthcare results for Q3

Longer term growth opportunities unchanged but delayed

Cinema content push-outs and industry shake-ups temper short term recovery and will shift renewal wave out

Hybrid in-office/remote working fuels ClickShare Conference opportunity with sales picking- up in recovering markets

Healthcare fundamentals intact while customers adjust 2H delivery timings

Navigating the crisis while focused on securing recovery potential

Management expects continuous pressure on topline performance & a considerable decrease in full year EBITDA margin

2021 cost base reset below 2019 while ensuring business continuity across the portfolio & preserving long term strategic initiatives

4	A soft 3rd quarter for the group with varied recovery rates

AGENDA

1. Exec Summary
2. Results
3. Zoom in on Cinema & ClickShare
4. We remain committed to our strategic journey
5. Navigating 2020 & beyond
6. Q&A

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FINANCIAL HIGHLIGHTS | RESULTS 3Q20 & RESULTS YTD

Soft Q3 & YTD performance, but Q3 recovery trend emerging in Enterprise

Year over year growth		Incremental growth vs Q2

Q3 reflects continued pandemic impact with

uneven recovery

• YTD sales -25%with
• Entertainment ytd -32% after -52% in Q3
• Enterprise ytd -35% with a -36% in Q3

6 Healthcare ytd flat after a -14% Q3

Q-o-q show initial signs of recovery

• Order intake +9% Q-o-Q fueled by Enterprise (EMEA & Americas) & Entertainment (APAC & EMEA)
• Prudent +3% recovery in Entertainment
• Enterprise start to rebound in both segments with high-single digit q-o-q recovery
• Healthcare soft with a 3rd quarter push-out for both Diagnostics and Surgical

SALES Q-o-Q group

-13%

RESULTS 3Q20 | REGIONS QUARTER-OVER-QUARTER

Evidence of regional covid dynamics, noticeable start of recovery in Enterprise in EMEA & APAC

AMERICAS | ENT +2% | ENP -14% | HC -20%

• Cinema & Events remain flat at low levels on limited content, partial re-openings and strict capacity limitations (US & LATAM)
• ClickShare investments flat q-o-q due to delayed returns to in-office works
• Healthcare slow on hospital budget constraints, with push-outs for both Diagnostics & Surgical

+7%

+1%

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EMEA | ENT +8% | ENP +14% | HC -1%

• Entertainment business up q-o-q, mainly in Middle-East cinema and rebound of services
• Momentum for ClickShare on 'back-to-office' activity; Control Rooms resilient and continued growth q-o-q in part driven by government funded projects
• Healthcare flattish q-o-q, slower diagnostics offset by stronger surgical sales

ASIA PACIFIC | ENT -1% | ENP +28% | HC -22%

• Entertainment sales flattish q-o-q while orders show momentum for both cinema as wel as V&H
• 'Back-to-office'trend and overall recovery translates into strong Enterprise momentum (ClickShare & Control Rooms)
• Following strong H1, a weaker Q3 in Healthcare with 3rd quarter push-outs for Diagnostics, while Surgical continues to expand

AGENDA

1. Exec Summary
2. Results
3. Zoom in on Cinema & ClickShare
4. We remain committed to our strategic journey
5. Navigating 2020 & beyond
6. Q&A

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UNEVEN RECOVERY OF THE CINEMA INDUSTRY

• of global box office

Covid is challenging the cinema eco-

system...

• Closures Release dates shifting
• Experimenting with release windows, box office split & PVOD
• (Re-)financing,closings, divestitures & consolidation

... and depressing global box office revenues in 2020...*

Cinema

Trade shows

Live music

... but will recover at multiple speeds

China back to Sep'19 levels

• 100% screens open
• Relaxed capacity constraints
• Intn'l & local content inflow

US lagging

• Partial reopening (65%); capacity constraints
• Tenet disappointment in US  studios shift dates 

reclosings... & impact on global dynamics

Rest of the world, a mixed bag

• 70% open, capacity easing
• Balancing between Hollywood and local content

22%

**

28%

50%

9	*Source: PWC, Global Entertainment & Media Outlook 2020-2024,September 2020	** Average market share box office 2018-2019 ; source ir.comscore.com & boxofficemojo.com

*** Source: Gowerstreet september 28: Graphs reflecting weekly box-office evolution over 3Q20

... BUT PROJECTOR RENEWAL WAVE STILL ANTICIPATED DESPITE ASSUMED TRIM & PUSH IN TIME

China | New

builds

1	2
a

Mature	Emerging	China |
markets
markets lamp
replacement	Replacement
to laser
replacements
	2b

Capture rate 2018-2019

world wide

BARCO

50%

SONY

CHRISTIE

NEC

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1. New builds (China & Emerging) remain on the plan but with deployment delays
2. Renewal market
3. 1. Total addressable market (#screens) could shrink with 10-20% vs pre-covid forecasts
   2. Mature market replacement wave interrupted in Q1'20, will steadily pick up over 2021, but overall expect curve will shift out of up to 2 years

While value proposition further strengthens

• Renewal need intact (end-of-life, efficiency, 4K)
• Premium and TCO prevails

Renewal-opportunity2021-2026

Pre-Covid	Current outlook
80-100k	65-80k projectors
4	3 contenders

CLICKSHARE CONFERENCE (CX) EXPANDING THE CLICKSHARE FAMILY AND CAPTURING HYBRID MEETING OPPORTUNITY

1. Future of Work = Hybrid
2. • Covid is catalyst to hybrid working & video-conferencing adoption
   • Offices are re-opening & employees want WFH max 2 days/wk*
   • By mid '21 Office/Home split at 75%/25%
3. Companies reshape work spaces for employee engagement
4. • Offices to become collaboration spaces; meeting spaces beat cubicles
   • Investments in hybrid workplaces to enable joining of in-person and videoconf participants

4. CS Conference. Sloping up with 'back to office". Stepping up awareness building

ClickShare distributor sell-out ("Present" & "Conference")

Global, ex -US

US

2019

2020

3. ClickShare Conference enables better hybrid meetings

• Wireless - flexible - agnostic - low investment - easy to install
• Partnering with all leading peripheral vendors

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APAC & EMEA tracking for recovery by early '21

• September at 80% vs 2019
• Germany/Nordics leading
• CS Conference 24% of total (Q3)

US trailing

• September at 50% vs 2019
• CS Conference 19% of total

* 2020 research Gartner, Company, Gensler + JLL

AGENDA

1. Exec Summary
2. Results
3. Zoom in on Cinema & ClickShare
4. We remain committed to our strategic journey
5. Navigating 2020 & beyond
6. Q&A

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WE REMAIN COMMITTED TO OUR STRATEGY | PROOFPOINTS 3Q20

Innovation, solutions & service

• • WallConnect Cloud to monitor video walls remotely
  • First LED-installs in Control Rooms
• Barco/Caresyntax: virtual OR presence
• NexxisCare cloudbased remote OR management
• Rolling out Insights Projector management
• Product line extensions UDM & UDX for V&H

Expanding commercial footprint & ICFC

• • Barco honored as one of China's top 10 digital OR construction suppliers in 2019
• Logitech, Jabra, Vadio & Yamaha join Barco's ClickShare alliance program
• Demetra launch for the US market

Sustainability

• • Barco reaches first target to reduce carbon footprint of own operations one year in advance
• Barco University expanded its training while reducing CO2 by 461 tons
• • RGB with a focus on green: Barco's sustainable next-generation RGB Laser video walls

We care - Supporting our partners

• • We'll be back! How museums will re-open after covid-19
• Film Fest Gent #CinemaReady!
• • #WeMakeEvents - Stand as ONE

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AGENDA

1. Exec Summary
2. Results
3. Zoom in on Cinema & ClickShare
4. We remain committed to our strategic journey
5. Navigating 2020 & beyond
6. Q&A

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RESET(TING) OPERATIONS AND OPEX LEVELS

I. Found balance in hosting a safe and productive hybrid work environment

• All sites operational, working partial capacity, managing supply chain
• Alternating teams, living hybrid work environment

II. Moving from temporary to structural cost contingency measures

• Cont'd discretionary spending stop, hiring freezes, scaling back temps, salary/bonus actions
• Moving from temp to structural measures where we see medium term impact. Redeploying divisional resources to highest needs
• Adjusting investment timetable of selected longer-term initiatives
• Resetting cost levels for 2021 below 2019

III. Managing cash, working capital and liquidity

• Working down inventory & DSO-levels during 2H20

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3Q20 +/- IN LINE WITH COVID-19 IMPACT ASSUMPTION |

POTENTIAL SECOND WAVE IMPACT UNCLEAR

Division/ Segment	Assumed Impact	3Q YTD	3Q20	Qualitative comments 4Q	Assumed
FY20	vs 2019	vs	evolution
	2Q20		4Q-vs-3Q
Entertainment	Material negative	-32%	+3%		~
Cinema	Material neg	--	~		~
				Recovery of renewal wave likely slow for next quarters
Replacement	Material neg	--	~	~
New builds	Med neg	-	~ New builds to show recovery but with delays	~+
Service revenues	Med neg	-	+ Services to further rebound as cinemas reopen	~+
Venues & Hospitality	Med neg	--	~		~
Events	Material neg	--	~	Events business likely to remain slow in next quarters	~
ProAV (fixed	Med neg	-	~ ProAV expected to show steady recovery quarter-over-quarter	~+
install)
Simulation	Neutral	~	+	Simulation steady	~
Enterprise	Med neg	-35%	+10%		~+
				ClickShare Conference well positioned for hybrid operation & expected
Corporate	Med neg	--	+	+
to slope up with back-to-office trend
Control Rooms	Med neg	--	+	Control Rooms showing resilience with gradual recession recovery	~
Healthcare	Positive=> Flat	+0%	-14%		~+
				Healthcare fundamentals remain solid but confronted with temp push-
Diagnostic Imaging	Positive=> Med Neg	~	--	~+
outs

Surgical	Neutral	~	--	~+

OUTLOOK

At this point, it is clear that 2020 will prove to be an off-year for the Barco P&L. To put the

company back on its path to reaching its long-term financial goals, we are resetting

expense levels while continuing to invest in strategic growth initiatives

Quote CEO, Jan De Witte

• Outlook 2020
• • Taking into account the uncertainties associated with the second covid wave, both in terms of its impact on ongoing recovery rates in Europe and delayed recovery in the Americas region, management expects continuous pressure on topline performance
  • Given lower volumes, unfavorable mix and continued investments in commercial and innovation strength, we expect a considerable decrease in full year EBITDA margin compared to the first half

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Q&A

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THANK YOU

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