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Parrot: 2020 full-year earnings

PRESS RELEASEParis, March 19, 2021, 7am CET 2020 full-year earnings Product portfolio’s realignment around commercial markets finalizedContinued innovations for drones and softwareHigh gross margin and operating expenditure stableFirst successes in the Defense and Security sector in France and internationally2021 order book trending up, driven by commercial drones and solutions In 2020, faced with an unprecedented health and economic situation, Parrot finalized the realignment of its portfolio of drones and solutions around commercial markets, confirmed the turnaround in its gross margin and maintained its capacity for innovation, while deploying on the Defense and Security drone market. Looking beyond the slowdown in sales linked to Covid-19, concentrated primarily over the first half of the year (-33.3% vs. -15.3% for H2), the business development plan was relatively unaffected by the health crisis; thanks to the dedication shown by the Group’s teams, its projects were able to move forward under virtually normal conditions and the contraction in revenues, resulting from the offering’s realignment around the new generations of commercial products, gradually slowed down during the year. The consolidated accounts for 2020 were approved by the Board of Directors on March 17, 2021. The audit procedures are currently being finalized by the statutory auditors and the reports will be issued once the necessary procedures have been completed. Condensed consolidated accounts – IFRS (€m) 20202019ChangeRevenues 57.376.1-24.7%Gross margin 40.248.5-17.0% % of revenues 70.2%63.7% Operating expenditure 76.276.9-0.8%Income from ordinary operations -36.0-28.4-26.7% % of revenues -62.9%-37.4% EBIT (2) -35.6-27.4-29.9% % of revenues -62.1%-36.0% Net income (Group share) -38.4-29.6-29.9% % of revenues -67.0%-38.9% Globally, the Group recorded €57.3m of consolidated revenues in 2020, with this contraction (-24.7%) linked primarily to the voluntary scaling back of consumer product sales. At end-2020, the new generations of drones and solutions represented 96% of revenues. In the fourth quarter of 2020, the contraction in consolidated revenues was reduced to -10.9% on an annual basis, with 15.1% growth compared with the third quarter of 2020. Revenues for the new generations of products came in 1% higher than the fourth quarter of 2019. Looking beyond the management of its sales strategy, the effects of the health crisis (lockdown, travel restrictions) were more marked for equipment sales (-25.8% excluding older generations of products), while sales of dedicated software for drone-based data analysis continued to grow (+3.7% excluding intragroup sales); they represent 41% of the Group’s sales at end-2020, compared with 30% at end-2019. These trends are set against a commercial drone market that declined by an estimated 12% in 2020, due to the impact of the health crisis1. From a geographical perspective, 16% of the Group’s consolidated revenues achieved average growth of 23.8%, driven in particular by the new commercial clients brought on board in South America and Germany, as well as the security contracts signed in Japan and Switzerland. In North America, the drop in sales (-19.4%) was partially offset by the success of the latest drone models (Anafi Thermal, Anafi USA) intended for government agencies and security forces in this field, which is particularly attentive to cybersecurity issues. In France (10% of Group revenues), where lockdown measures have been extensive, the contraction in revenues came to 42.9%, excluding the framework agreement signed at the start of 2021 with the French Defense Procurement Agency (DGA) for the Anafi USA. Similar trends can be seen in Spain and the UK, where many institutions, concerned about their data security, are now choosing Parrot drones. The product strategy rolled out since the end of 2018, focused on commercial drones and solutions that are reliable in terms of both performance and data security, is driving a major turnaround in the gross margin rate, up to 70.2%. The growing percentage for software and the reduction in consumer product sales are the key factors behind this improvement. In 2020, the Group continued to manage its operations with two core priorities: maintaining its strong capacity for innovation, which is essential for guaranteeing its future on the drone market, and ensuring strict control over costs, with an improvement in the impact of the measures adopted in 2019. EBIT came to €(35.6)m, compared with €(27.4)m in 2019, primarily reflecting the drop in sales; it takes into account the furlough measures applied, mainly in Switzerland and Germany, with the economic support arrangements put in place by their respective governments, which accounts for €2.3m of savings on staff costs for the year. In this context, operating expenditure for the year came to €76.2m (-0.9%), stable compared with 2019. This reflects: A 14.2% increase in R&D spending (€40.2m), with the finalization of the Anafi USA, launched in September 2020 for the Defense and Security market, the new generation of business software from Pix4D, factoring in a growing number of uses and integration for mapping, inspection and security, and the renewal of the fixed-wing drone range (eBee), combining endurance and easy handling, presented at the start of 2021;A 24.9% reduction in sales and marketing spending (€16.3m), made possible by the streamlining of the organization and the reduction in consumer activities, reinforced by the effects of the health crisis (virtually zero travel, no events, etc.);A virtually stable level (+1.5%) of overheads (€13.6m);A reduction (-7.6%) in production and industrialization spending (€6.1m), linked primarily to the furlough measures. The change in financial income and expenses in 2020, with €(2.2)m versus €(1.1)m in 2019, is linked to the dollar’s depreciation. Taking into account the absence of any taxes in 2020, net income (Group share) came to €(38.4)m, compared with €(29.5)m in 2019. Changes in the cash position and balance sheet at December 31, 2020The Group had €85.5m of net cash at end-December 2020, excluding the impact of IFRS 16 (€77.9m including IFRS 16), compared with €125.1m excluding the impact of IFRS 16 (€116.0m including IFRS 16) in 2019. Cash, cash equivalents and other current financial assets came to €88m, down €38.6m year-on-year, in line with expectations. Cash consumed by operations totaled €(30.1)m, linked primarily to earnings for the period benefiting from the positive €2.5m change in working capital requirements. Specifically, this reflects a €4.3m reduction in trade receivables, factoring in both the lower level of revenues and the discipline for collecting outstanding amounts. Trade payables and prepaid expenses also decreased by €4.3m, reflecting the product portfolio’s realignment, partially offset by a reduction in the value of inventory by €3.1m to €10.2m at December 31, 2020. Cash consumed for investment activities came to €(3.8)m, taking into account a €2m investment in a software company in the fourth quarter of 2020. Cash flow consumed for financing activities came to €(2.8)m, primarily including €4.0m for leases with the application of IFRS 16. The sale of the company Micasense, effective from January 27, 2021, is expected to generate an estimated cash-in of €12.9m in 2021, net of transaction costs, including US$3m of AgEagle Aerial Systems Inc. shares (UAVS, NYSE American). The sales price includes additional payments for US$2.25m then US$2.5m, in March 2022 and March 2023 respectively, subject to the standard guarantees given in connection with the agreement. Outlook for 2021 Without a doubt, commercial drones represent the emergence of a new industry that will deeply mark the 21st century, in the same way that automobiles, telecommunications and aerospace did in their time. While there seems to be considerable potential for growth in commercial activities over the coming years, the pace of the market’s growth is strongly correlated with changes in the legislative context and professionals’ capacity (financial, technical, operational) to incorporate these technologies. Parrot aims to continue supporting the development of this new high-tech industry, driven by a dedicated portfolio of high-performance solutions for 3D Mapping, Geomatics and Inspection, Defense and Security, and Precision Farming, adapted for a growing number of use cases based primarily on the collection and analysis of high-precision data. As the leading European group on the drone market, with technological and capital sovereignty, the Parrot Group intends to remain focused on moving forward with its projects, notably finalizing new commercial products, applying a sales strategy targeting professionals, businesses, key accounts and governments, and ensuring strict control over costs. The Group will continue to build on the highest standards of security and transparency to conquer market shares. The strategy applied by the Group since 2018, taking into account a significant contraction in revenues and based on a technological value creation roadmap for commercial markets, has made it possible to turn around the gross margin. The scope effects linked to the change in the product portfolio are expected to continue to become less marked in 2021. Vigilant concerning the potential impact of the health measures and tensions on the components market, the Group has secured the vast majority of its purchases in 2021. Parrot will continue to capitalize on its capacity for innovation, its product quality and its constant focus on managing its operations and allocating its resources effectively. In line with the 2021 business development plan, including the product launches, production plans and order book, the return to growth could be achieved in the second half of 2021, driven by the acceleration of deliveries in the Defense and Security sector in particular. Next financial dates: 2021 first-quarter revenues: Friday May 21, 2021 before start of trading.Combined general meeting: Wednesday June 16, 2021, at 8:30am Paris time.2021 first-half earnings: Friday July 30, 2021 after close of trading. ABOUT PARROT Founded in 1994 by Henri Seydoux, Parrot is today the leading European group in the fast-growing industry of drones. Visionary, at the forefront of innovation, Parrot is positioned across the entire value chain, from equipment to services and software. Its micro-drones, well known for their high performance and ease of use, address the needs of professionals as well as consumers. The Group also has a portfolio of outstanding companies and interests in commercial drones, covering equipment, software and services. Its expert capabilities are focused primarily on three vertical markets: (i) 3D Mapping, Surveying and Inspection, (ii) Defense and Security and (iii) Agriculture. The Parrot Group designs and engineers its products in Europe, mainly in France and Switzerland. It currently employs over 500 people worldwide and makes the majority of its sales outside of France. Parrot, headquartered in Paris, has been listed since 2006 on Euronext Paris (FR0004038263 – PARRO). Financial information is available on http://corporate.parrot.com. For more information visit: www.parrot.com, www.pix4d.com, www.sensefly.com CONTACTS Investors, analysts, financial media Marie Calleux – T: +33(0) 1 48 03 60 60parrot@calyptus.netConsumer and tech media Cecilia Hage – T: +33(0) 1 48 03 60 60 cecilia.hage@parrot.com APPENDICES REVENUES BY BUSINESS UNIT €m and % of revenuesFY 2020FY 2019ChangeQ4 2020Q4 2019ChangeParrot Drones (microdrones)18.733%31.942%-41%6.338%8.345%-24% Of which, legacy consumer products(1)2.24%9.312%-77%0.74%2.815%-76%Pix4D (software)23.341%22.530%+4%6.740%6.233%+8%senseFly (drones and sensors)10.819%14.219%-24%2.415%2.413%-2%MicaSense (sensors and services)5.39%7.510%-29%1.38%1.68%-17%Airinov (services) (2)0.00%0.61%-0.0–0–Parrot SA0.30%1.82%-85%0.10%0.53%-87%Intragroup eliminations-1.1-2%-2.3-3%-52%-0.3-2%-0.5-3%-46%PARROT GROUP TOTAL57.3100%76.1100%-25%16.5100%18.5100%-11%DRONE TOTAL (3)55.196%66.287%-17%15.896%15.785%+1% (1) Legacy consumer products: previous drone ranges (Bebop, Disco, Mini Drones), automotive products (car kit, plug & play) and connected devices. (2) The Airinov business was discontinued at the end of 2019. (3) “Drone total” is an alternative performance indicator to measure the impact of strategic decisions; for the periods presented, it is determined by deducting from the Group’s total revenues the activities that are at the end of their lives or have been shut down, i.e. Parrot Drones’ legacy consumer products and Airinov’s revenues. CONSOLIDATED INCOME STATEMENT IFRS in €m and % of revenuesFY 2020FY 2019Revenues57.376.1Cost of sales(17.0)(27.6)Gross margin40.248.5 % of revenues70.2%63.7%R&D costs(40.2)(35.2) % of revenues-70.2%-46.3%Sales and marketing costs(16.3)(21.7) % of revenues-28.4%-28.5%Administrative costs and overheads(13.6)(13.4) % of revenues-23.8%-17.7%Production and quality costs(6.1)(6.6) % of revenues-10.7%-8.6%Income from ordinary operations(36.0)(28.4) % of revenues-62.9%-37.4%Other operating income and expenses0.51.0EBIT(35.6)(27.4) % of revenues-62.1%-36.0%Financial income and expenses(2.2)(1.1)Share in income from associates(0.4)(0.6)Corporate income tax(0.3)(0.4)Net income(38.4)(29.6)Minority interests(0.1)0.0Net income (Group share)(38.4)(29.5) % of revenues-67.0%-38.9% CONSOLIDATED BALANCE SHEET ASSETS – IFRS, €m December 31, 2020December 31, 2019Non-current assets21.020.9Goodwill(0.0)(0.0)Other intangible assets0.40.4Property, plant and equipment2.32.2Right of use5.96.6Investments in associates5.05.6Financial assets6.54.4Non-current lease receivables0.71.6Deferred tax assets0.20.2Current assets121.7168.2Inventories10.213.3Trade receivables6.010.3Tax receivables7.66.0Other receivables9.111.2Current lease receivables0.70.7Cash and cash equivalents88.0126.6Assets held for sale2.7-TOTAL ASSETS145.4189.1SHAREHOLDERS’ EQUITY AND LIABILITIES – IFRS (€M) December 31, 2020December 31, 2019Shareholders’ equity99.7139.2Share capital4.64.6Additional paid-in capital331.7331.7Reserves excluding earnings for the period(204.0)(174.3)Earnings for the period – Group share(38.4)(29.5)Exchange gains or losses5.26.3Equity attributable to shareholders99.2138.7Non-controlling interests0.50.5Non-current liabilities10.610.9Non-current financial liabilities1.81.5Non-current lease liabilities4.15.7Provisions for pensions and other employee benefits1.30.9Deferred tax liabilities0.00.0Other non-current provisions0.10.1Other non-current liabilities3.42.6Current liabilities33.638.9Current financial liabilities0.7-Current lease liabilities3.53.4Current provisions3.95.2Trade payables11.916.3Current tax liabilities0.10.0Other current liabilities13.514.0Liabilities held for sale1.6-TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES145.4189.1 CONSOLIDATED CASH FLOW STATEMENT IFRS (€m)December 31, 2020December 31, 2019Operating cash flow Earnings for the period from continuing operations(38.4)(29.6) Net income attributable to owners of the parent(38.4)(29.5) Non-controlling interests(0.1)(0.0)Share in income from associates0.40.6Depreciation and amortization3.7(7.4)Capital gains and losses on disposals0.31.0Tax expense0.30.4Cost of share-based payments1.11.5Net finance costs0.20.3Cash flow from operations before net finance costs and tax(32.4)(33.1)Change in working capital requirements2.54.0Tax paid(0.2)(0.5)Cash flow from operating activities (A)(30.1)(29.5)Investing cash flow Acquisition of property, plant and equipment and intangible assets(2.1)(1.4)Acquisition of subsidiaries, net of cash acquired-(1.0)Acquisition of financial assets(2.3)(0.5)Disposal of property, plant and equipment and intangible assets0.10.1Disposal of subsidiaries, net of cash divested(0.4)-Disposal of investments in associates–Disposal of financial assets0.80.9Cash flow from investment activities (B)(3.8)(1.8)Financing cash flow Equity contributions0.00.0Receipts linked to new loans1.70.0Cash invested for over 3 months -0.0Net finance costs(0.2)(0.3)Repayment of short-term financial debt (net)(4.2)(4.0)Sales / (Purchases) of treasury stock (4)-0.0Cash flow from financing activities (C) (2.8)(4.3)Net change in cash position (D = A+B+C)(36.7)(35.6)Impact of change in exchange rates(1.1)0.7Impact of changes in accounting principles (IFRS 5 reclass.)(0.8)-Cash and cash equivalents at start of period126.6161.5Cash and cash equivalents at end of period88.0126.6 *** 1 https://www.businesswire.com/news/home/20200520005335/en/Global-Commercial-Drones-Market-2020-to-2030—COVID-19-Growth-and-Change—ResearchAndMarkets.com Attachment Parrot_CP_FY-2020_0319_EN_DEF

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