AAC TECHNOLOGIES HOLDINGS INC. (Incorporated in the Cayman Islands with limited liability) (Stock code: 2018 HK) 2021 1Q Results 14 May 2021 0 2021 Q1 Result Overview 1 1 F Revenue and profitability for the Group showed notable improvements year on year 48.8% 1Q21 Revenue Breakdown 28.6% 15.7% 6.6% Acoustics Electromagnetic Drives & Precision Mechanics Optics MEMS 43.3% 40.1% 11.2% 5.4% 4Q20 Revenue Breakdown Gross Profit YoY Change YoY Revenue 4.29 billion +20.6% 31.1% + 8.0 p.p RMB Margin +909.6% 1.34 bil ...

Research and Development - Research and development expenses accounted for 11.2% of revenue, with a total of 4,335 R&D personnel across 19 global centers[9] - As of December 31, 2020, the company held 6,034 patents and had 6,287 patents pending[9] - The company aims to enhance per capita output to levels comparable to developed countries through continuous improvement in production processes and global production layout[10] - The company focuses on high-tech, high-value-added precision manufacturing to establish leading advantages in various segments for sustainable development[8] - The company has developed a technology platform to improve R&D efficiency and maintain technological leadership in sub-sectors such as optics and MEMS[11] - The company emphasizes innovation-driven development, continuously enhancing its R&D and high-precision manufacturing capabilities[7] - The company has a strategic focus on core technology R&D in MEMS, electromagnetic transmission, acoustics, optics, and precision components[9] - The company aims to enhance R&D capabilities and customer satisfaction to maintain its market leadership[21] - The company’s R&D expenses increased by 11.8% to RMB 1.92 billion in 2020, primarily due to increased R&D in the optical business[46] Financial Performance - Revenue for 2020 was RMB 17,140,219 thousand, a decrease of 4.2% compared to 2019[14] - Net profit attributable to shareholders for 2020 was RMB 1,506,707 thousand, a decrease of 32.2% from 2019[14] - R&D expenses as a percentage of revenue increased to 11.2% in 2020, up by 1.6 percentage points from 2019[14] - Capital expenditures in 2020 were RMB (5,087,990) thousand, an increase of 67.8% compared to 2019[14] - The gross profit margin for 2020 was 24.7%, a decrease of 3.9 percentage points from 2019[14] - Free cash flow for 2020 was RMB (1,399,535) thousand, indicating a significant cash outflow[14] - Total asset return rate decreased to 4.1% in 2020, down by 2.8 percentage points from 2019[14] - The group's total revenue for the year decreased by 4.2% year-on-year to RMB 17.14 billion, with a gross margin of 24.7% and a net profit of RMB 1.51 billion, down 32.2% year-on-year, primarily due to supply chain impacts from the pandemic[22] - In Q4 2020, total revenue was RMB 4.78 billion, a year-on-year decline of 9.8%, but the gross margin improved to 28.1%, an increase of 4.5 percentage points quarter-on-quarter, with net profit reaching RMB 756 million, a quarter-on-quarter increase of 75.7%[22] Business Strategy and Operations - The company is focusing on internal management transformation and business diversification to adapt to rapid industry changes[21] - The optical business completed two rounds of strategic financing in 2020 and received approval for a separate listing on a Chinese stock exchange, aiming to enhance strategic expansion and attract talent[23] - The MEMS microphone shipments saw significant year-on-year growth in 2020, with plans to continue market penetration through distribution channels in 2021[22] - The company aims to enhance its acoustic business profitability through the launch of standardized small cavity speaker modules in 2021[22] - The company is actively expanding its market presence in the notebook and tablet metal structural components, aiming to improve capacity utilization and mitigate business risks[39] Sustainability and Corporate Responsibility - The company has a commitment to sustainability, publishing an independent sustainability report annually since 2013[4] - The company has set a clean energy target for 2030 and initiated measures such as transitioning to solar energy and introducing electric vehicles[24] - The company achieved 100% waste conversion at two plants in Changzhou under a zero landfill waste program[24] - The company made donations amounting to approximately RMB 880,000 for COVID-19 prevention measures during the fiscal year ending December 31, 2020[108] Risk Management - The company has implemented a comprehensive risk management and internal control system to address strategic, market, operational, financial, and compliance risks[59] - The company faces foreign exchange risks due to its international operations, with cash inflows primarily in RMB and USD, maintaining a balanced ratio[65] - The company has implemented measures to mitigate risks from unforeseen events, such as the COVID-19 pandemic, ensuring a safe working environment[67] - The company has established an enterprise risk management framework to effectively identify, assess, mitigate, and monitor key strategic, market, financial, operational, and compliance risks[186] Governance and Board Composition - The company has a diverse board with members holding significant experience in finance, technology, and corporate governance, enhancing its strategic decision-making capabilities[70][71][72][73] - The board includes members with international experience, which may facilitate the company's market expansion and global strategy[71][73] - The company emphasizes compliance and legal matters, as highlighted by Mr. Mo's responsibilities in financial operations and legal compliance[70] - The board has established separate committees, all chaired by independent non-executive directors, to assist in governance and oversight[124] Shareholder and Financial Structure - The company reported its annual financial statements for the year ending December 31, 2020, which were approved by the board on March 25, 2021[79] - The company has a share incentive plan allowing for a maximum of 1.65% of the issued share capital to be awarded, which equates to 19,940,250 shares as of March 25, 2021[107] - The company’s major shareholders include individuals with significant stakes, such as Mr. Pan and Ms. Wu, whose interests are disclosed in the report[103] - The company has established continuous related party transactions that comply with the Hong Kong Listing Rules[95] Employee and Management - The group employed 33,735 full-time employees as of December 31, 2020, a decrease of 14% from 39,385 employees on December 31, 2019, primarily due to automation efforts and reduced manpower needs caused by the pandemic[110] - The senior management team's compensation is determined based on qualifications, experience, responsibilities, market benchmarks, company performance, and individual performance[175] - The company is committed to investing in talent to develop innovative products and has established multiple R&D centers across Asia, Europe, and North America[110] Audit and Compliance - The audit for the financial statements was conducted by Deloitte, with a resolution to reappoint them as auditors presented at the annual general meeting[115] - The audit and risk committee reported on risk management and internal controls during the fiscal year[134] - The company has adopted best practices in corporate governance since its listing, publishing quarterly financial results to provide shareholders with deeper insights into performance and business progress[146] - The company has established a structured risk management and internal control system aimed at managing risks rather than eliminating them, providing reasonable but not absolute assurance against material misstatements[145]

Financial Performance - Revenue for the first half of 2020 was RMB 7,837,054 thousand, representing a 3.6% increase year-on-year[11]. - Net profit for the first half of 2020 decreased to RMB 320,465 thousand, a decline of 58.4% compared to the previous year[11]. - The gross profit margin for the first half of 2020 was 23.2%, down 4.3 percentage points from the previous year[11]. - In Q2 2020, the company's revenue increased by 12.1% year-over-year to RMB 4.28 billion, while gross profit rose by 4.2% to RMB 1 billion[13]. - The net profit for Q2 2020 decreased by 20.8% year-over-year to RMB 270 million, resulting in a net profit margin of 6.3%, down 2.6 percentage points from the previous year[13]. - The gross profit for the first half of 2020 was RMB 1.8 billion, a decrease of 12.8% compared to RMB 2.1 billion in the same period of 2019, with the gross margin declining from 27.5% to 23.2%[35]. - The company reported a pre-tax profit of RMB 320,465,000 for the first half of 2020, a decrease of 58.38% from RMB 769,809,000 in the same period of 2019[150]. Research and Development - Research and development expenses accounted for 12.5% of revenue in the first half of 2020, an increase of 1.5 percentage points year-on-year[11]. - R&D expenses for the first half of 2020 amounted to RMB 983 million, an increase of 18% compared to RMB 831 million in the same period of 2019, driven by increased R&D in the optical business[37]. - The company is committed to ongoing R&D investments to innovate and improve user experience, which is crucial for meeting customer specifications[52]. - AAC Technologies is actively involved in R&D across various fields, including acoustics, optics, and micro-electromechanical systems (MEMS)[195]. Capital Expenditure and Financial Position - Capital expenditure for the first half of 2020 was RMB (2,316,002) thousand, a significant increase of 75.6% compared to the previous year[11]. - The company recorded an operating cash inflow of RMB 1.46 billion in the first half of 2020, with capital expenditures of RMB 2.32 billion[13]. - The group’s capital expenditures for the first half of 2020 totaled RMB 2,316.0 million, compared to RMB 1,319.0 million in the same period of 2019[44]. - The company’s total assets as of June 30, 2020, amounted to RMB 26,768,715 thousand, compared to RMB 26,496,546 thousand at the end of 2019, showing a slight increase of 1.03%[126]. - Cash and cash equivalents as of June 30, 2020, were RMB 5,093,735 thousand, up from RMB 3,173,423 thousand as of June 30, 2019, indicating a year-on-year increase of 60.5%[129]. Market and Product Development - The company aims to lead market innovation and enhance user experience through advanced proprietary technology solutions[4]. - The optical business saw a significant revenue increase of 43.1% year-over-year in Q2 2020, reaching RMB 380 million, with a gross margin improvement to 13.8%[15]. - The company is actively promoting the WLG glass-plastic hybrid lens, aiming for mass production by the end of 2020, which is expected to enhance optical performance significantly[17]. - The company plans to launch a classic enhanced speaker with a 0.75mm amplitude in the second half of 2020, aiming to improve acoustic technology standards[18]. - The company is focused on diversifying its product and technology platforms to reduce dependence on any single segment, thereby mitigating risks associated with market fluctuations[51]. Governance and Risk Management - The board of directors is responsible for overseeing the company's overall strategic direction and policies, ensuring effective risk management and internal controls[62]. - The company has established a governance framework that includes independent committees for audit, nomination, and remuneration, all composed of independent non-executive directors[65]. - The company has implemented a structured risk management system to address operational and financial risks[75]. - The board has emphasized the importance of diversity, with 57.14% of board members being independent directors[77]. Social Responsibility and Sustainability - During the first half of 2020, the company donated over 5,000 sets of medical protective equipment and 350,000 surgical masks to support communities during the COVID-19 pandemic[118]. - The company aims to reduce sludge emissions by approximately 500 tons in 2020 through ongoing investments in sludge reduction projects[119]. - The company is dedicated to sustainable development goals (SDGs) and adheres to international standards for corporate governance and social responsibility[199]. Shareholder Information - The company reported a strong financial performance with a revenue increase of 15% year-over-year, reaching $1.2 billion[72]. - The interim dividend for 2020 was HKD 0.10 per share, a decrease from HKD 0.40 in the previous year[176]. - As of June 30, 2020, the total number of shares held by the directors and senior management was 495,317,652, representing 40.98% of the issued shares[92].

Research and Development - Research and development expenses accounted for 9.6% of revenue, with 4,177 R&D personnel across 19 global centers[11] - The company holds 4,411 patents and has 4,785 patents pending as of December 31, 2019[11] - The company is expanding its R&D in micro-acoustics, touch motors, actuators, and MEMS, maintaining technological leadership in these segments[12] - The company has implemented a platform technology to improve R&D efficiency and resource integration across various product lines[12] - The company continues to focus on innovation-driven development to meet future market demands[8] - The company has a strategic goal of leading market innovation and enhancing user experience[2] - The company is committed to creating value for customers through high-performance and quality products[2] Financial Performance - Total revenue for 2019 was RMB 17.88 billion, a decrease of 1.4% year-on-year[24] - Gross margin for 2019 was 28.6%, down from 37.2% in 2018, with Q4 2019 gross margin at 29.0%[24] - The company reported a net profit of RMB 2.22 billion for 2019, significantly lower than RMB 3.80 billion in 2018[24] - Capital expenditures for 2019 were RMB 3.03 billion, representing 60.9% of EBITDA[24] - The group's net profit for the year decreased by 41.5% year-on-year to RMB 2.22 billion, primarily due to a decline in gross profit and an increase in R&D costs[25] - The gross profit for 2019 was RMB 5.1 billion, a decline of 24% from RMB 6.7 billion in 2018, resulting in a gross margin decrease from 37.2% to 28.6%[43] Market Trends and Impact - The impact of COVID-19 is expected to negatively affect demand for smartphones in Q1 2020, leading to lower revenue, gross profit, and net profit[23] - Global smartphone shipments decreased by 2.3% year-on-year to 1.37 billion units in 2019, with a recovery trend observed in the second half of the year[28] - The global 5G smartphone shipments reached 19 million units in 2019, accounting for 1.4% of total smartphone shipments, and are projected to grow to 199 million units (15%) in 2020[28] Operational Efficiency - The company aims to enhance operational efficiency through strict cost control and increased automation[23] - The company aims to enhance production standardization and digitization through self-designed automated equipment[12] - The group plans to commence mass production of the WLG platform in 2020, which is expected to contribute significantly to long-term performance[25] Corporate Governance - The company has a strong commitment to corporate social responsibility, with board members involved in various non-profit organizations and educational institutions[70] - The board of directors includes members with diverse backgrounds in technology, finance, and academia, enhancing the company's strategic decision-making capabilities[70][71][72][73] - The company emphasizes the importance of independent directors in maintaining corporate governance and risk management practices[71][73] - The board consists of independent non-executive directors, ensuring a governance structure that promotes accountability and transparency[122] Risk Management - The company has established an enterprise risk management framework to effectively identify, assess, mitigate, and monitor key strategic, market, financial, operational, and compliance risks[187] - The internal audit team has confirmed the effectiveness of the internal control system for the fiscal year ending December 31, 2019[189] - The company conducts quarterly reviews of its major financial and regulatory risk exposures with management[188] Shareholder Information - The company reported a mid-term dividend of HKD 0.40 per ordinary share for the fiscal year ending December 31, 2019, but decided not to declare a final dividend[81] - The company's distributable reserves amounted to RMB 1,707,881,000, slightly down from RMB 1,716,775,000 in 2018[82] - Major shareholders as of December 31, 2019, include GIC Private Limited holding 6.99% and JPMorgan Chase Group holding 10.48% of the company's shares[107] Employee and Management - The group employed 39,385 full-time employees as of December 31, 2019, an increase of approximately 9% from 35,995 employees on December 31, 2018, primarily due to expansion in Nanning and Vietnam[114] - The company’s employee compensation is determined based on individual performance, qualifications, industry experience, and market trends[114] Audit and Compliance - The consolidated financial statements for the year were audited by Deloitte, and a resolution to reappoint Deloitte as the company's auditor will be presented at the annual general meeting[118] - The audit and risk committee is responsible for overseeing the implementation and regular review of the whistleblowing policy[196] - The company has adopted best practices in corporate governance, publishing quarterly financial results to provide shareholders with deeper insights into performance and business progress[149]

Financial Performance - Revenue for the first half of 2019 was RMB 7,567,523, a decrease of 10.2% compared to RMB 8,424,381 in the first half of 2018[8]. - Net profit for the first half of 2019 was RMB 769,809, representing a significant decline of 56.7% from RMB 1,778,421 in the same period last year[8]. - The gross profit margin decreased to 27.5%, down by 9.2 percentage points from 36.7% in the first half of 2018[8]. - The group's total revenue for the first half of 2019 was RMB 7.57 billion, a year-on-year decrease of 10%[12]. - Gross margin for the first half of 2019 dropped by 9.2 percentage points to 27.5% due to overall market weakness and early-stage product designs[12]. - Net profit for the first half of 2019 decreased by 57% to RMB 770 million, impacted by declining gross profit and increased R&D expenses[12]. - Total revenue for the first half of 2019 was RMB 7.6 billion, a 10% decrease compared to the same period in 2018, driven by declines in acoustics and electromagnetic transmission segments[30]. - Gross profit for the first half of 2019 was RMB 2.1 billion, down 33% from RMB 3.1 billion in the same period of 2018, with gross margin decreasing from 36.7% to 27.5%[31]. - The company reported a pre-tax profit of RMB 887,822 thousand, down 55.6% from RMB 1,996,704 thousand in 2018[112]. - Basic earnings per share for the period were RMB 0.64, down from RMB 1.46 in the same period last year[112]. Research and Development - Research and development expenses accounted for 11.0% of revenue in the first half of 2019, an increase of 2.4 percentage points compared to 8.6% in the first half of 2018[8]. - Research and development expenses increased by 15% to RMB 831 million in the first half of 2019, primarily due to increased R&D in the optical business[33]. - The company has invested heavily in R&D, resulting in a total of 3,956 patents related to acoustic and new technology platforms[51]. - The company successfully obtained 639 new patents during the first half of 2019, expanding its intellectual property portfolio to a total of 3,956 patents[104]. - The company applied for an additional 694 patents, bringing the total pending patents to 2,917[104]. Cash Flow and Investments - Cash flow from operating activities for the first half of 2019 was RMB 1,785 million, down from RMB 3,810.2 million in the first half of 2018[39]. - Net cash used in investing activities for the first half of 2019 was RMB 1,218.8 million, compared to RMB 2,458.0 million in the same period of 2018[42]. - Cash flow used in financing activities for the first half of 2019 was approximately RMB 1,452.0 million, with dividends paid to shareholders amounting to RMB 1,094.3 million[43]. - The company reported a decrease in cash outflows for the purchase of property, plant, and equipment to RMB (676,977) from RMB (1,294,565) in the previous year, a reduction of 47.7%[115]. - The company received government grants related to the acquisition of property, plant, and equipment amounting to RMB 63,651[115]. Shareholder Returns and Dividends - The board declared an interim dividend of HKD 0.40 per share, consistent with the previous year's interim dividend[12]. - The group plans to enhance shareholder returns through dividends and share buybacks, totaling approximately HKD 1.56 billion in the first half of 2019[12]. - The total amount of interim dividends declared was HKD 1,244,755,000 (approximately RMB 1,094,264,000), compared to RMB 1,751,456,000 for the same period in 2018[151]. Market and Competitive Environment - The global smartphone market experienced a downturn in 2019, which could adversely affect the company's financial performance[51]. - The ongoing US-China trade tensions may lead to a slowdown in the global consumer electronics market, potentially reducing orders from major customers[57]. - The company continuously monitors competitive conditions and market trends to maintain its competitive position through innovation[54]. Corporate Governance - The board of directors is committed to high standards of corporate governance, ensuring compliance with all corporate governance codes as of June 30, 2019[60]. - The company has established a governance framework that includes independent non-executive directors in key committees, ensuring accountability and transparency[68]. - The board evaluates its performance and that of its committees annually, ensuring effective governance practices are in place[67]. - The company is committed to adhering to all applicable legal and regulatory requirements in its operating jurisdictions[85]. Risk Management - The company has implemented a comprehensive risk management and internal control system to address various strategic, market, operational, financial, and compliance risks[50]. - The company faces liquidity and interest rate risks due to bank loans used for operational capital and capital expenditures[54]. - The company is exposed to foreign exchange risks, particularly with sales primarily denominated in USD while reporting in RMB[55]. Employee and Talent Development - The group employed 36,057 full-time employees as of June 30, 2019, a slight increase from 35,995 employees as of December 31, 2018[49]. - The company emphasizes talent development, particularly for young professionals, to enhance its "smart manufacturing" capabilities[107]. Acquisitions and Related Transactions - The acquisition of Shenzhen Xuan Ying Tong Electronics Co., Ltd. was completed on May 17, 2018, for a total consideration of RMB 164,131,000[171]. - The net cash outflow from the acquisition was RMB 155,079,000 after accounting for cash and cash equivalents acquired[173]. - Related party transactions included purchases of raw materials totaling RMB 55,966,000 for the first half of 2019, compared to RMB 53,143,000 in the same period of 2018[178].

Research and Development - The company invested 7% to 8% of its revenue in R&D annually, maintaining a competitive strategy focused on technological leadership[21]. - As of December 31, 2018, the company held 3,366 patents and had 2,968 patents pending[21]. - The company has established 15 R&D centers globally, employing 3,982 R&D personnel[21]. - The company is developing a technology platform to enhance the integration and efficient use of R&D resources across various fields[23]. - The company continues to expand its core technology R&D to maintain global technological leadership[21]. - The company is focusing on developing advanced solutions in MEMS design and digital chips to capture market share as 5G applications grow[63]. - The company aims to enhance the vertical integration of MEMS microphones, increasing self-manufactured design and ASIC chip ratios to 15% and 45%, respectively[62]. - The company has established multiple R&D centers in Asia, Europe, and North America, with a new center in Hong Kong expected to commence operations in Q2 2019[134]. Financial Performance - Revenue for 2018 decreased by 14.1% to RMB 18,131 million, while net profit fell by 28.7% to RMB 3,796 million[33]. - Gross margin declined by 4.1 percentage points to 37.2% in 2018[43]. - Free cash flow increased significantly by 2,765.5% to RMB 2,861 million[33]. - The company reported a return on equity of 20.8%, down 12.8 percentage points year-on-year[32]. - The net asset liability ratio was 6.2%, a decrease of 1.1 percentage points compared to the previous year[32]. - The company reported a total of 1,218,000,000 shares issued as of December 31, 2018[114]. - The company’s financial performance for the first quarter of 2018 was reviewed and approved by the Audit and Risk Committee[167]. - The company’s consolidated financial statements have been audited by Deloitte[138]. Market Position and Strategy - The company focuses on high-tech, high-value micro-component business to establish leading advantages in various segments for sustainable development[27]. - The company anticipates a new growth cycle in the smartphone industry, driven by advancements in 5G technology and innovative device designs[44]. - The company plans to actively explore new markets, including VR/AR devices and smart cars, to drive multi-domain collaborative development[45]. - The company aims to consolidate the market position of its entry-level superlinear structure products and accelerate the upgrade of the superlinear structure technology platform in 2019[53]. - The company expects to significantly increase the overall shipment volume of superlinear structure products in 2019, covering all mainstream flagship models and expanding into the mid-range market[53]. Corporate Governance - The company is committed to maintaining high standards of corporate governance, as evidenced by the qualifications and experience of its board members[93][94][95][96]. - The board's composition reflects a diverse range of expertise across different industries, which is beneficial for strategic market expansion[94][96]. - The company has a structured approach to board appointments, ensuring that directors are subject to re-election according to established rules[93][94][95][96]. - The independent directors have no relationships with major shareholders, ensuring unbiased oversight and governance[93][94][95][96]. - The company emphasizes compliance and legal matters, with a dedicated executive director overseeing these areas[93]. - The board consists of a diverse group of independent directors, enhancing the effectiveness of its oversight functions[143]. - The board evaluates its performance and that of its committees annually, ensuring effective governance and accountability[144]. Risk Management - The company has implemented a quality management system, ensuring all products undergo thorough testing to meet customer and international standards[87]. - The company maintains a structured risk management and internal control system to manage operational, financial, and compliance risks[162]. - The company emphasizes transparency and accountability in its governance practices, aligning with best practices in corporate governance[141]. - The company has a whistleblowing policy since 2012 to ensure all relevant matters are addressed[198]. Shareholder Relations and Dividends - The company declared an interim dividend of HKD 0.40 per ordinary share and proposed a final dividend of HKD 1.03 per ordinary share for the fiscal year ending December 31, 2018[105]. - The company aims to declare two dividends each fiscal year, considering financial performance, working capital, capital expenditures, future investments, and other relevant factors[199]. - The board will continuously review the dividend policy for the long-term benefit of shareholders[199]. Employee and Management Structure - The company employed 35,995 full-time employees as of December 31, 2018, a decrease of 31% from 52,171 employees on December 31, 2017, due to natural attrition and automation[134]. - The senior management team's compensation is determined based on qualifications, experience, responsibilities, market benchmarks, company performance, and individual performance[191]. - The remuneration committee is responsible for recommending overall remuneration policies for executive directors and senior management, ensuring alignment with corporate goals[181]. Related Party Transactions - The company has engaged in significant related party transactions, which comply with the listing rules and have been reviewed by external auditors[124]. - The company has established purchase agreements for essential raw materials necessary for production activities[120]. - The company’s related party transactions are deemed fair and reasonable, benefiting both the company and its shareholders[122].