Online Trade shows Magazines Research (NASDAQ-GS: GSOL)

Transcription

1 Online Trade shows Magazines Research (NASDAQ-GS: GSOL) Global Sources Investor Presentation September 2008

2 Safe Harbor This presentation contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended and Section 21-E of the Securities Exchange Act of 1934, as amended. The company's actual results could differ materially from those set forth in the forward-looking statements as a result of the risks associated with the company's business, changes in general economic conditions, and changes in the assumptions used in making such forward-looking statements. 2

3 Business at a Glance A leading B2B media company facilitating China trade Total Solution Online marketplaces Exhibitions Magazines Research reports Direct online sales Founded in 1970 HQ: Hong Kong 3,500 team members 69 locations - 44 in China Financial Strength $199M Revenue* $57M Cash from Operations* $221M Cash and Securities** No bank or long term debt** * TTM ending June 30, 2008 ** As of June 30, 2008 Revenue Sources* 95% from suppliers for marketing/advertising services By media: 43% online 29% exhibitions 25% print 3% other 63% China, 37% ROW 14% Chinese language media * TTM ending June 30,

4 Investment Overview Targeting very large, high growth market opportunity primarily focused on China s exports, imports and domestic B2B market Online becoming majority of total revenue after 3 successive quarters of strong, accelerating growth -- in challenging current environment characterized by slower overseas demand and cost pressures on suppliers Driving long term growth through online market penetration, development of new trade shows and expansion into China s domestic B2B market Continuing to invest in new and existing products -- and sales representation to maximize competitive advantages and position for future market opportunities 4

5 Greater China to the World Community: 196,000 verified and unverified suppliers Key Driver: Verified suppliers with the ability to export 15 Vertical Markets - Auto Parts & Accessories - Baby & Children s Products - Computer Products - Consumer Electronics - Electronic Components - Fashion Accessories - Garments & Textiles - Gifts & Premiums - Hardware & DIY - Home Products - Machinery - Security Products - Sports & Leisure - Telecom Products - Underwear & Swimwear Lead Generation: 36 million to suppliers through Global Sources Online alone for 12 months ending June 30, 2008 Product Shipments Community: 725,000 active buyers in 230 countries (certified with E&Y) Key Driver: Professional buyers that import and outsource in volume 5

6 World to Greater China Product Shipments & Services 7 Vertical Markets - Electronic Engineering - Electronic Design - Electronics Manufacturing - Fashion Accessories - Baby & Children s Products - Lifestyle - Management Community: More than 1 million including registered online users and BPA audited subscribers Key Drivers: Need and demand for imported products Community: Manufacturers of semiconductors and electronics equipment -- plus luxury consumer brands Key Drivers: Companies want to penetrate the China market International IC-China is China s biggest semiconductor show. Held annually in four locations, in 2008 there were 36,046 attendees and 1,400 booths including 8 of the world s top 10 makers as exhibitors. 6

7 China to China Community World s 4th largest economy World s largest manufacturing economy Potential addressable market includes millions of buyer/ seller companies Key Drivers Strong growth prospects Rapidly improving infrastructure and supply chain Substantially untapped B2B media opportunities Product Shipments 15 VERTICAL MARKETS Auto Parts & Accessories Baby & Children s Products Computer Products Consumer Electronics Electronic Components Fashion Accessories Garments & Textiles Gifts & Premiums Hardware & DIY Home Products Machinery Security Products Sports & Leisure Telecom Products Underwear & Swimwear 7

8 Business Strategy: Online, Trade Shows and Print Online Offline media spending dominates China s B2B sector*: Trade Shows & Trade Media Online Other (3%) 25% 72% Print Cross marketing Trade shows Competitive advantages of strategy Cross-marketing Barriers to entry Serve entire buying process Compete for suppliers entire budget * Analysys International is a leading advisor about technology, media and telecom industries in China. 8

9 Buyer Sourcing Online: Concerns & Preferences Buyers Primary Concerns About Suppliers When Sourcing Online Why Buyers Prefer Global Sources Online Quality issues 92% Choice of quality, verified suppliers Actual supplier capability 80% Fast search Non-compliance with standards 79% Quality selection of new products Fraud / False claims Non-delivery 70% 75% Verified supplier, star-ranking system Depth & quality of specialized information Poor communication 64% Lack of 3rd party supplier verification 63% Intellectual Property Rights (IPR) issues 60% 0% 20% 40% 60% 80% 100% Source: Synovate survey of 1,088 international buyers visiting China Sourcing Fairs in Hong Kong in April

10 Powerful Differentiation: Addressing Key Buyer Needs handbags Comprehensive Search Results Verified suppliers, unverified suppliers and the web Verified Suppliers Visited 3 times -- information reviewed and edited by Global Sources 94% of buyers prefer to inquire to verified suppliers (Source: Synovate) Verification content from Global Sources, Verify, and Bureau Veritas Global Sources Verify Supplier Ranking System Six-Star system based on amount of information provided by other parties Helps buyers evaluate suppliers -- and helps suppliers differentiate 10

11 Powerful Differentiation: Supplier Needs Met By Media Need Media Online Marketplaces Trade Publications Trade Shows Private Sourcing Events Lead Generation Branding & Differentiation Negotiation & Orders Notes: Export suppliers three primary needs are: (1) Lead generation, (2) Branding and differentiation from competitors, and (3) Face-to-face opportunities to negotiate and receive orders. Online Marketplaces only addresses lead generation, trade shows facilitate negotiation and orders etc. 11

12 Powerful Differentiation: Larger, More Professional Buyers China Sourcing Fair Attendees Larger customers than SMEfocused competitors Alliance for Asian sourcing with Agentrics (17 of top 30 retailers) Hundreds of Private Sourcing Events annually for large buyers The world s biggest buyers attend our China Sourcing Fairs 12

13 Driving Revenue Growth Online Market Penetration with Global Sources Online 2.0 Promoting supplier verification benefits and market leadership Continuing roll-out of repackaged services and pricing New Product Development 2008: New China Sourcing Fairs in Dubai, China and India 2009: Expansion of spring China Sourcing Fairs and IC shows Expansion in China s Domestic B2B market Begin monetizing China Global Sources Online in Q408 Develop two new shows launched in Shanghai in

14 Investing to Support Growth Continue to Invest in 2H08 Sales representation in China Expanding field and telesales representation from base of 2,200 sales and client services team members* Content development Continuing expansion of product profiles and supplier websites on the English and Chinese versions of Global Sources Online Marketing to suppliers and buyers For online media and new / developing shows * Approximate as of June 30,

15 Millions Strong Cash Generation & High Visibility Cash, Securities, and Deferred Income Cash and securities: $221M* Strong cash generation: $57M** 75% of Total Assets* High visibility from long term contracts, advance collections and recurring revenue Deferred income: $87M* 44% of Revenue** Up 19% compared to June 30, 2007 Up 5% compared to Dec. 31, 2007 * As of June 30, 2008 ** TTM ending June 30,

16 Revenue Growth and Mix Revenue Growth Revenue Mix by Line of Business (2H08 is estimate) Online growth accelerating since Q % in Q407 27% Q108 30% in Q208 43% (estimated) for 2H08 Exhibitions revenue growth moderating and print revenue declining Online expected to soon be more than 50% of total revenue + versus same period previous year * Estimates related to guidance figures Note: Growth % compared to same period previous year. 16

17 Earnings per Share Non-GAAP net income excludes non-cash stock-base compensation, gains or losses on acquisitions and/or impairment charges. Non-GAAP EPS is defined as non-gaap net income divided by the weighted average shares of diluted common shares outstanding non-gaap EPS excludes a $7.9 million gain from sale of 199 shares of the company s subsidiary emedia Asia Ltd; $4.1 million in non-cash stock-based compensation; and an impairment charge of $0.7 million on the company s HC International investment non-gaap EPS excludes $7.8 million in non-cash stock-based compensation; a gain of $2.4 million from the sale of shares of HC International; an impairment charge of $1.8 million on the company s HC International investment; and an impairment charge of $3.1 million pertaining to business acquisition of Blue Bamboo China Ventures. Q208 non-gaap EPS excludes non-cash stock-based compensation of 1.5 million 17

18 Guidance Q Expectations* Revenue $38.5M to $39.0M Up 14-15% versus Q307 GAAP EPS $ $0.03 Compared to $0.11 in Q307 Non-GAAP EPS $0.04 to $0.05 Compared to $0.13 in Q307 Second Half of 2008 Expectations* Revenue $108.0M to $109.5M Up 14-16% versus 2H07 GAAP EPS $0.23 to $0.25 Compared to $0.28 in 2H07 Non-GAAP EPS $0.27 to $0.29 Compared to $0.39 in 2H07 Non-GAAP net income excludes non-cash stock-based compensation, gains or losses on acquisitions and/or impairment charges. Non-GAAP EPS is defined as non-gaap net income divided by the weighted average shares of diluted common shares outstanding. 18

19 Investment Highlights Large and attractive market opportunity Powerful differentiation with end-to-end offerings Strong, accelerating online revenue growth from industry leading website that is changing the competitive landscape Strong cash generation, high revenue visibility and solid balance sheet Clear growth opportunities for market penetration, new product development and expansion in China s domestic B2B market GSOL is a proxy for investing in B2B China trade 19

20 Online Trade shows Magazines Research (NASDAQ-GS: GSOL) Thank You

21 Income Statement YTD JUNE YTD JUNE YEAR YEAR y-y (in US$ millions except number of shares and % data) growth % growth % Revenues Online Print Exhibitions Miscellaneous Total revenue Operating expenses (86.5) (75.7) (14) (159.1) (138.4) (15) Operating incom e Interest and dividend income (39) Gain on sale of available-for-sale securities Gain on sale of shares to minority shareholder and interest income thereon (100) Loss on investment, net 0.0 (1.8) 100 (1.8) (0.7) (157) Impairment of goodw ill and intangible assets (3.1) 0.0 (100) Foreign exchange losses, net (1.3) (0.5) (160) (1.2) (0.8) (50) Incom e before incom e taxes (13) Income tax expense (0.4) (0.6) 33 (0.3) (0.9) 67 Minority Interest (1.3) (1.3) 0 (2.1) (1.9) (11) Cumulative effect of change in accounting principle (100) GAAP Net incom e (14) GAAP Net incom e per diluted share (15) Total shares used in diluted net income per share calculations (GAAP Net Income) 47,434,955 46,843,657 46,986,861 46,538,312 21

22 Q GAAP to Non-GAAP Reconciliation In U.S. Dollars Thousand, Except Number of Shares and Per Share Data Three months ended June 30, Six months ended June 30, GAAP EPS $ 0.18 $ 0.09 $ 0.35 $ 0.23 GAAP Net Income $ 8,420 $ 4,190 $ 16,625 $ 10,718 Non-cash stock-based compensation expense / (credit) (Note 1) 1,474 2,769 (103) 3,293 Loss on investment, net (Note 2) - 1,846-1,846 Non-GAAP Net Income $ 9,894 $ 8,805 $ 16,522 $ 15,857 Non-GAAP diluted net income per share $ 0.21 $ 0.19 $ 0.35 $ 0.34 Total shares used in non-gaap diluted net income per share calculations 47,543,536 47,039,911 47,434,955 46,843,657 Notes: (1) Non-cash stock-based compensation expense / (credit). (2) An impairment charge of approximately $2.3 million on the company's HC International investment, net of $0.5 million received pursuant to indemnification obligations of the vendor under the purchase agreement for HC International investment. 22

23 Q3 and 2 nd Half 2008 Guidance GAAP to Non- GAAP Reconciliation In U.S. Dollars Million, Except Number of Shares and Per Share Data GLOBAL SOURCES LTD. AND SUBSIDIARIES GUIDANCE GAAP to NON-GAAP RECONCILIATION (In U.S. Dollars Million, Except Number of Shares and Per Share Data) GUIDANCE Three month ended September ACTUAL GUIDANCE ACTUAL Three month Six month Six month ended September 30 ended December 31 ended December Revenue GAAP EPS Non-cash stock-based compensation expenses (Note 1) Gain on sale of HC shares (Note 2) Impairment charge for Blue Bamboo (Note 3) Non-GAAP diluted net income per share $38.50 to $39.00 $33.8 $ to $ $94.6 $0.02 to $0.03 $0.11 $0.23 to $0.25 $0.28 $0.02 $0.02 $0.02 $0.04 $0.04 $ ($0.05) $0.07 $0.04 to $0.05 $0.13 $0.27 to $0.29 $0.39 Total shares used in non-gaap diluted net income per share calculations Notes: 47,553,353 47,553,353 47,090,456 47,494,995 47,494,995 46,986,861 (1) Non-cash stock-based compensation expenses (2) A gain of approximately $2.4 million arising from the sale of the shares of HC International. (3) Impairment charge of approximately $3.1 million recorded by the company on intangible assets and goodwill pertaining to the business acquisition of Blue Bamboo China Ventures. 23