Exceed Company Ltd. Third Quarter 2010 Results Presentation › Media_Files › IROL › 21 ›...

Exceed Company Ltd.Third Quarter 2010 Results Presentation

November 16, 2010

喜得龙 Official Partner of Fitness for All

Safe Harbor Statement

This presentation contains forward‐looking statements within the meaning ofthe Private Securities Litigation Reform Act of 1995 regarding future eventsd f t f f E d C Ltd (“E d”) Thand future performance of Exceed Company Ltd (“Exceed”). These

statements are based on management’s current expectations or beliefs.Actual results may vary materially from those expressed or implied by thestatements herein. This information is qualified in its entirety by cautionarystatements and risk factor disclosure contained in certain of Exceed'sSecurities and Exchange Commission filings. For a description of certainfactors that could cause actual results to vary from current expectations andforward‐looking statements contained in this presentation, please refer tog p , pdocuments that Exceed files from time to time with the Securities andExchange Commission. Exceed is under no obligation to, and expresslydisclaims any obligation to, update or alter its forward looking statements,whether as a result of new information future events changes inwhether as a result of new information, future events, changes inassumptions or otherwise.

2© 2010 Exceed Company Limited

Agenda

• Company Overview

l O i• Results Overview

• Financial Highlights

• Operational Updates

• Strategy & Outlook


Company Overview

NASDAQ listing: October 2009

Ticker: NASDAQ: EDS (Global Market)

Market Cap: US$225.7 Million, as of Nov 15, 2010

Shares Outstanding: Approximately 25.3 Million, as of September 30, 2010

About Exceed:

Headquarters: Fujian, China

Business ProfileThe owner and operator of “Xidelong” brand, one of the leading domestic sportswear brands in China with strengthsBusiness Profile leading domestic sportswear brands in China with strengths in 2nd and 3rd cities

Investor Information:

www.ir.xdlong.cn


Results Overview

New product demand and increased brand equity drove sales revenue growth

Effective cost control enhances profitability

• Revenue: RMB832.4 million (US$124.4milion), 25.8% year‐over‐year increase

G fi 2 2 8 illi (US$3 8 illi ) 28 3%

Effective cost control enhances profitability

• Gross profit: RMB252.8 million (US$37.8million), 28.3% year‐over‐year increase

• Gross margin: 30.4%, 0.6 percentage point year‐over‐year increase

• Operating profit: RMB128.1 million (US$19.1million), 91.1% year‐over‐year increase

• Net profit: RMB111.0 million (US$16.6million), 98.6% year‐over‐year increase

• Growth drivers:– Strong demand in China’s sportswear market lays solid ground – “Happy Lifestyle” advertising campaign building brand equity and boosting ASPEffective expansion plan broadens geographical reach– Effective expansion plan broadens geographical reach

– Diligent cost allocations improve margins


Financial HighlightsFinancial Highlights


Financial Highlights

(In millions, except EPS data)Q3 2010US$ 4

Q3 2010RMB

Q3 2009RMB

Y‐o‐Y%

Total Net Revenue 124 4 832 4 661 7 25 8%Total Net Revenue 124.4 832.4 661.7 25.8%

Gross Profit 37.8 252.8 197.1 28.3%

Operating Profit 19.1 128.1 67.0 91.1%

Profit for The Period Attributable to 16 6 111 0 55 9 98 6%

Equity Holders of The Company 16.6 111.0 55.9 98.6%

Basic EPS 1 0.66 4.39 9.73 ‐54.9%

Diluted EPS 2 0.59 3.98 8.86 ‐55.1%

Q3 2010 Q3 2009 Y‐o‐Y

Gross Margin 30.4% 29.8% 0.6pts

Operating Margin 3 15.4% 10.1% 5.3pts

Profit Margin Attributable to Equity Holders of the Company 3

13.3% 8.4% 4.9pts

Notes:

1. The weighted average basic shares outstanding for the three months ended September 30, 2010 was 25,303,727; the weighted average basic shares outstanding for the three months ended September 30, 2009 was 5,741,466. The increase is mainly due to new shares issued during new listing in Oct 2009.

2 The weighted average diluted shares outstanding for the three months ended September 30 2010 was 27 909 665 the weighted average diluted shares outstanding


2. The weighted average diluted shares outstanding for the three months ended September 30, 2010 was 27,909,665 the weighted average diluted shares outstanding for the three months ended September 30, 2009 was 7,220,478.

3. The operating margin for the 9 months ended September 30, 2010 and 2009 are 15.8 % and 13.3% , respectively. The net profit margin for the 9 months ended September 30, 2010 and 2009 are 13.6% and 11.3%, respectively. Both margins improved for the 9 months period.

4. RMB to $US conversions were made using the exchange rate of US$1.00=RMB6.6905.

Revenue – Strong Apparel Sales Growth

Revenue Contribution by ProductNet Revenue

1,296.4

1,820.3

2,078.0

30%

40%

1,500

2,000

2,500 53.1%

45.5%45.8%53.4%

40%50%60%

661.7 832.4

0%

10%

20%

0

500

1,000

1.1% 1.1%

0%10%20%30%

Q3 2010 Q3 2009 Y‐o‐Y 9M ended Sep. 9M ended Sep. Y‐o‐Y

FY 07 FY 08 FY 09 3Q09 3Q10

0%3Q09 3Q10

Footwear Apparel Accessories

(In millions)

Q3 2010RMB

Q3 2009RMB

Y o Y%

9M ended Sep. 30, 2010

9M ended Sep. 30, 2009

Y o Y%

Footwear 378.4 351.1 7.8% 986.3 791.6 24.6%

Apparel 444.3 303.0 46.6% 1,036.3 670.8 54.5%


Accessories 9.7 7.6 27.7% 20.4 16.1 26.7%

Revenue – Rising Volume and ASP Support Growth

Sales Volume Growth: Footwear & Apparel

16.013

1718

16

20

Wholesale Average Selling Price (ASP) Growth: Footwear & Apparel

65 368.8 68.8 64 9

72.8 80

90

10.3

13.4

16.0

5.4

13

6.78

12

Pairs

/Pie

ces

in

mill

ions

65.3 64.9

45.5 51.0 53.6

58.3 66.3

30

40

50

60

70

RM

B

5.25.2

0

4

FY 07 FY 08 FY 09 3Q09 3Q10

Footwear Apparel

0

10

20

FY 07 FY 08 FY 09 3Q09 3Q10

Footwear Appareloot ea ppa e

Y-o-Y growth: 3Q YTD

Footwear: -3.9% 17.8%

Y-o-Y growth: 3Q YTD

Footwear: 12.1% 5.8%


Apparel: 29.0% 37.2% Apparel: 13.7% 12.6%

Improving Gross Margin

Gross Profit & Gross Margin

YTD (first 9 months)GPM 31 5%

497

613.1

26.0%27 3%

29.5%29.8% 30.4%

30%

40%

500

600

700

ons

• Xidelong brand momentum driving increased ASP

• Cost control in footwear

GPM: 31.5%Y-o-Y growth: 2.1pts

336.9

197.1 252.8

27.3%

10%

20%

200

300

400

RM

B in m

illio Cost control in footwear

production further enhanced overall gross margin

0%

10%

0

100

FY 07 FY 08 FY 09 3Q09 3Q10

Gross Profit Gross Margin


Operating Margin Enhanced with Better Cost Management

• A&P expenses: Change in spending cycle led to lower expenses; YTD15.4%

20%

500

600

Operating Profit and Operating Margin

YTD (first 9months)OPM: 15.8%Y-o-Y growth: 2.5pts

cycle led to lower expenses; YTD expense to sales ratio maintained

• R&D expenses: Continued investments in new design to enhance

d t ff i157.9

194.2

281.4

12.2%

10.7%

13.5%

10.1%10%

200

300

400

500

RM

Bin

mill

ions

product offering

• Administrative expenses: Slightly increased due to legal and professional fees after listing

67 128.1

0%0

100

FY 07 FY 08 FY 09 3Q09 3Q10

Operating profit Operating Margin

A&P Expenses

209

247.9 16.3%

11 7% 16%

20%

250

300

lions

Administrative Expenses

44.5

3%

4%

40

50

ns

R&D Expenses

2525

30 3%

lions

127.7

209

107.9 97.1

9.9%11.5%

11.9%

11.7%

0%

4%

8%

12%

6%

0

50

100

150

200

RM

Bin

mil 30

29.2

10.2 11.7

2.3%1.6%

2.1% 1.5% 1.4%

0%

1%

2%

3%

0

10

20

30

RM

Bin

mill

ion

12.8

17.6

7 8.11.0% 1.0%

1.2%1.1% 1.0%

0

5

10

15

20

25

0%

1%

2%

RM

Bin

mil


FY 07 FY 08 FY 09 3Q093Q10A&P % of Sales

FY 07 FY 08 FY 09 3Q09 3Q10Administrative % of Sales

FY 07 FY 08 FY 09 3Q09 3Q10R&D % of Sales

A& P Expenses YTD (first 9 months):2009: 11.7% 2010: 11.7%

Tax Expenses

( ll )3Q 10US$

3Q 10RMB

3Q 09RMB

Y‐o‐Y %(in millions) US$ RMB RMB

Tax Expenses 2.5 16.7 1.9 +779.0%

Profit Before Tax 19.1 127.6 57.8 +120.8%

Effective Tax Rate (%) 13.0% 3.3% +9.7 pts

• Tax expense increase primarily due to the expiration of the full exemption period of Xidelong (China) Co. Ltd., EDS’s principal PRC subsidiary, from PRC corporate income tax on Dec. 31, 2009.

• This subsidiary however will be entitled to a 50% reduction in the PRC• This subsidiary, however, will be entitled to a 50% reduction in the PRC corporate income tax until Dec. 31, 2012.


Net Income Growth; EPS Impacted by New Listing

(in millions, except for EPS)

3Q 10US$

3Q 10RMB

3Q 09RMB

Y‐o‐Y %YTD 10RMB

YTD 09RMB

Y‐o‐Y %

Net Income 16.9 111.0 55.9 98.6% 278.6 167.8 66.0%

Basic EPS 0.66 4.39 9.73 ‐54.9% 11.06 29.23 ‐62.2%

Diluted EPS 0.59 3.98 8.86 ‐55.1% 9.73 26.61 ‐63.4%

B i i ht dBasic weighted average number of shares outstanding

25,303,727 25,303,727 5,741,466 ‐ 25,201,293 5,741,466 ‐

Diluted weighted average number of shares 27,909,665 27,909,665 7,220,478 ‐ 28,632,885 7,220,478 ‐outstanding

, , , , , , , , , ,

Pro forma diluted EPS 0.38 2.51 ‐ ‐ 6.30 ‐ ‐

Pro forma diluted number of shares 44,187,376 44,187,376 ‐ ‐ 44,187,376 ‐ ‐outstanding *

, , , , , ,

* A ll ti t i bl h t t t di d t i t d h f l i ti


* Assume all contingent issuable shares, warrant outstanding and restricted shares from employee incentive plan are included in the number of diluted shares outstanding

Liquidity and Balance Sheet

(in millions)Sep 30, 2010

US$Sep 30, 2010

RMBDec 31, 2009

RMBChange

%

Cash and bank balances and pledged time deposits

98.0 655.7 277.2 136.5%

Inventory 12.8 85.6 56.0 52.9%

Trade Receivables 87.6 585.9 812.7 ‐27.9%

Total Current Assets 203.4 1,360.7 1,165.9 16.7%

Trade and Bills Payables 18.4 122.9 195.5 ‐37.1%

Total Current Liabilities 31.1 208.3 319.4 ‐34.8%

Total Equity 218.0 1,458.3 1,148.4 27.0%

(in millions)3Q10 US$

3Q10 RMB

3Q09 RMB

9 Months 2010 RMB

Net Cash flow 19.0 127.3 ‐17.5 393.5

3Q10 3Q09 Y‐o‐Y Change

Inventory Turnover Days 13 15 ‐2


Trade Receivables Turnover Days 64 74 ‐10

Trade Payables Turnover Days 19 47 ‐28

Operational UpdatesOperational Updates


Sales Network – Deepening Penetration

• Expanding nationwide sales network: – 4,194 stores at the end of Sep 2010

dd d f– 557 new stores added from Sep. 30, 2009 to Sep. 30, 2010 to meet growing demand

• Deepening penetration into new areas: – Focus in 3rd tier cities in Guangdong, Liaoning 110

Jilin 45

Heilongjiang202

Focus in 3 tier cities in Guangdong, Jiangsu and Zhejiang provinces

– Added 123 stores in these provinces from Sep. 30, 2009 to Sep. 30, 2010

Jiangsu 105

Xinjiang 85

Qinghai 8

Sh hAnhu

Shandong 128Hebei 56

Beijing 27Tianjin

Liaoning 110Inner Mongolia

62

Gansu62

Shaanxi318 Henan

170

Shanxi130

Ningxia41

N b f R il S hTibet 3

Sichuan214

Yunnan375

Guizhou66Guangxi Guangdong

Fujian 116

Shanghai

Zhejiang 388

Anhui

277Chongqing

196

Hunan136

Jiangxi143

Hubei 290

170

3 277

3,694 3,637

4,194

3,600

4,000

4,400

Number of Retail Stores hiaiai

375 Guangxi193

Guangdong248

With over 200 retail storesWith 100-200 retail storesWith 50 100 retail stores A f S t b 30 2010

Total = 4,194

3,277

2,519

2 000

2,400

2,800

3,200

3,600

Stor

es


With 50-100 retail storesWith less than 50 retail stores

As of September 30, 20102,0002007 2008 2009 2009 2010

Dec 31 Sep 30

Marketing Initiatives – Enhancing Brand Value

• “Happy Lifestyle” promotional campaign – Broad and effective television advertising campaign

• New product launches in lifestyle apparel segment– Prominent store displays

• Sponsorship “Inter‐City” television program – Sponsorship of popular CCTV entertainment show since early 2010

Initiatives improve and enhance the Xidelong brand profile


Initiatives improve and enhance the Xidelong brand profile

Strategy and OutlookStrategy and Outlook


Growth Strategy

Capitalize on high growth potential of 2nd and 3rd tier iti d t ti t d i i iti th

Deepen Market Penetration cities, deepen penetration to drive acquisitive growthPenetration

Focused marketing efforts to strengthen brand profile Strengthen Market

Elevate “XIDELONG” brand equity to achieve higher

g g pand improve store traffic

gPosition

Elevate XIDELONG brand equity to achieve higher ASPs and margin expansion Enhance Brand Equity

Focused three‐pronged strategy to drive organic and acquisitive growth and to

improve profitability


Operational Initiatives

• Expand distribution network to meet fast‐growing demand– Addition of 700 stores on average in 2010 and 2011, to reach around 5,000 stores by the end of 2011, representing an 35.4% increase from 2009.

– Total of 500 stores added in the first nine months of 2010. – Penetrate new cities, with the focus in 3rd tier cities in Guangdong, Jiangsu and Zhejiang provinces

– Select expansion in 2nd tier cities

• Increase sales efficiency – Raise brand profile through strategic advertising campaign– New marketing campaign and spokespersons to align brand image and product, enhance brand equity

• Drive ongoing margin expansionE d i th h hi h ASP– Expand margin through higher ASP

– Improve production efficiency


Fiscal Year 2010 Guidance

• Exceed expects to generate net revenues in the range of RMB 2,639.0 million to RMB 2 680 6 million in the fiscal year 2010 representing anmillion to RMB 2,680.6 million in the fiscal year 2010, representing an approximately 27% to 29% year‐over‐year increase compared with RMB2,078.0 million in 2009.

• This forecast reflects the Company’s current and preliminary view, and is subject to change.


Q and AQ and A


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