Q1FY17/18 Earnings Announcement

Transcription

1 Q1FY17/18 Earnings Announcement Aug 17, 2017 New York Aug 18, 2017 Hong Kong 2017 Lenovo Internal. All rights reserved.

2 Forward Looking Statement This presentation contains forward-looking statements which are statements that refer to expectations and plans for the future and include, without limitation, statements regarding Lenovo s future results of operations, financial condition or business prospects as well as other statements based on projections, estimates and assumptions. In some cases, these statements can be identified by terms such as "expect," "intend," "plan," "believe," "estimate," "may," "will," "should" and comparable words (including the negative of such words). These forward-looking statements, reflect the current expectations and plans of the directors and management of Lenovo, which may not materialize or may change. Many risks, uncertainties and other factors, some of which are unpredictable and beyond Lenovo s control, could affect the matters discussed in these forward-looking statements. These factors include, without limitation, economic and business conditions globally and in the countries where we operate, Lenovo s ability to predict and respond quickly to market developments, consumer demand, pricing trends and competition; changes in applicable laws and regulations (including applicable tax and tariff rates). Any variance from the expectations or plans on which these forward-looking statements are based could cause Lenovo s actual results or actions to differ materially from those expressed or implied in these statements. These forward-looking statements are not guarantees of future performance and you are cautioned not to place undue reliance on these statements. Lenovo undertakes no obligation to update any forwardlooking statements in this presentation, whether as a result of new information or any subsequent change, development or event. All forward-looking statements in this presentation are qualified by reference to this paragraph. 2

3 Yuanqing Yang Chairman & CEO Aug 17, 2017 New York Aug 18, 2017 Hong Kong 2017 Lenovo Internal. All rights reserved.

4 Maintain PC Profitability to Fuel New Businesses Build MBG & DCG into New Growth Engines Invest in Device + Cloud and Infrastructure + Cloud Powered by A.I. 4

5 Stable performance as we build new growth engines Revenue stabilized: $10 billion, flat year-on-year Operational PTI* improved $110 million quarter-to-quarter Entering new phase of growth Quarterly Revenue ($ Millions) Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/ Lenovo. All rights reserved. Source: Internal Data *Operational PTI: Reported Pre-Tax Income excl. non-cash M&A charges and one-time property disposal gain 5

6 Solid execution shows progress 1 st wave: PC business winning defensive battle Prioritized profitability, improved ASP by 7% year-on-year Revenue was stable year-on-year Maintained industry leading profit margin of 4.2%. 550 Lenovo PC ASP ($) % Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/ Lenovo. All rights reserved. Source: Internal Data 6

7 Solid execution shows progress 2 nd wave: Mobile business on track to breakeven in 2 nd half of the year Built competitiveness in brand, products, channels, and organization Strong progress in Latin America, Western Europe, North America Revenue year-on-year outgrew the market; PTI margin improved by 2.2 pts Smartphone Performance LA W Europe Share YTY +4.5pts +1.5pts Vol. YTY 56.4% 136.7% Mkt prem pts pts 5188 CA (K units) Q1 16/17 Q1 17/18 Q1 16/17Q1 17/ Lenovo. All rights reserved. Source: IDC & internal Data 7

8 Solid execution shows progress 2 nd wave: Data center business gains good momentum Right organization, expert leadership, dedicated salesforce and talents in place Launched most comprehensive product line in Lenovo history Positive growth year-on-year in largest markets: North America and EMEA Invest in hyperscale business model, network & storage attach and new tech. Will start contributing profit in two years #1 CUSTOMER SATISFACTION #1 RELIABILITY #1 PERFORMANCE Source: TBR, ITIC, and industry benchmarks 2017 Lenovo. All rights reserved. 8

9 Solid execution shows progress Solid execution shows progress 3 3 rd rd wave: wave: Device+Cloud Device+Cloud and and Infra.+Cloud Infra.+Cloud made shows good good progress progress Lenovo Lenovo Tech Tech World World Shanghai: at Shanghai: shared vision of intelligent transformation, showcased latest innovation, and received positive feedback Shared vision of intelligent transformation Showcased latest innovation 2017 Lenovo. All rights reserved. 9

10 Deeper customer centric transformation Lenovo ID registered users 225 Million, up 50% year-on-year Monthly Active Users 90 Million Repurchase Revenue Up 12% quarter-to-quarter Non-device revenue $400 Million 10

11 Looking forward Approaching the turning point As the new profit engines gain speed, results will follow 2017 Lenovo. All rights reserved. 11

12 Wong Wai Ming Chief Financial Officer Aug 17, 2017 New York Aug 18, 2017 Hong Kong 2017 Lenovo Internal. All rights reserved.

13 Q1 FY2017/18 Highlights Revenue stabilized at US$10 billion despite market challenges Operational PTI improvement of US$110 million QTQ thanks to improvement from DCG and MBG DCG: Rev up +14% QTQ resulted in PTI margin improvement QTQ MBG: Revenue continued to grow YTY for 2 nd consecutive quarter with profitability improvement PCSD: Maintained industry-leading profitability US$ Million Q1 FY2017/18 Q1 FY2016/17 Q4 FY2016/17 Revenue 10,012 10,056 9,579 Gross Profit 1,365 1,534 1,368 Operating Expenses (1,371) (1,289) (1,294) Operational PTI (105) Add: Property Disposal Gain Less: Restructuring Charge - - (24) Less: Non-cash M&A Related Accounting Charges Financial Snap Shot (74) (75) (74) Pre-tax (Loss)/Income (As Reported) (69)

14 Cash and Working Capital US$ Million Q1 FY2017/18 Q1 FY2016/17 Q4 FY2016/17 Bank deposits and cash 1,541 2,064 2,951 Total Borrowings 2,843 3,231 3,037 Net (Debt)/Cash Reserves (1,302) (1,167) (86) Net cash (used in)/ generated from operating activities (577) 8 (26) Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Days receivable Days inventory Days payable Cash conversion cycle Lenovo Internal. All rights reserved. 14

15 PC & Smart Device Business Group (PCSD) Overview Revenue up 0.2% YTY and 4.8% QTQ with ASP improvement Remained a leading player in PC+Tablet, share gain in AP and EMEA Double digit growth in gaming segment PTI at 4.2% down YTY due to component cost increase Highlights Focused on product mix and ASP performance to mitigate the component cost increase Strong EMEA revenue growth with margin expansion thanks to solid performance in Western Europe Balanced between profit and growth in NA US$ Million Q1 FY2017/18 Q1 FY2016/17 Q4 FY2016/17 Revenue 7,005 6,992 6,682 Pre-tax Income Pre-tax Income Margin (%) 4.2% 5.3% 4.3% 2017 Lenovo Internal. All rights reserved. 15

16 Mobile Business Group (MBG) Overview Revenue grew 2nd consecutive quarter YTY Strong sales momentum in LA and Western Europe Strong shipment for mainstream Moto models (Moto C, E and G) and achieved over 3 million units within 12 months of Moto Z Better product mix in ROW drove overall PTI margin improvement both QTQ & YTY, despite component cost pressure; Losses narrowed in China Highlights Strong new Moto product launch in India; continue to invest in channel expansion Strong momentum in Western Europe with improved ASP and profitability sequentially driven by better product mix Strong momentum in LA (Shipment:+56% YTY; mkt share: 14.2% up 4.5pts); marketing investment in new product launches Balanced the growth and profitability in the rest of Emerging Markets US$ Million Q1 FY2017/18 Q1 FY2016/17 Q4 FY2016/17 Revenue 1,746 1,706 1,772 Pre-tax Loss Operational (129) (163) (177) Reported* (173) (206) (220) Pre-tax Income Margin (%) Operational (7.4)% (9.6)% (10.0)% Reported* (9.9)% (12.1)% (12.4)% * Included non-cash M&A-related accounting charges, such as intangible asset amortization, imputed interest expense of promissory notes and others 2017 Lenovo Internal. All rights reserved. 16

17 Data Center Business Group (DCG) Overview Transformation on track Signs of stabilization: Revenue +14% QTQ; driven by growth returning in NA & EMEA while PTI margin improved QTQ Continued strong performance in Global Account & HPC Continued component cost increase impacted overall margin Highlights Installed the largest supercomputer in the world on next generation Intel platform at Barcelona supercomputer center Launched the largest product portfolio in its history with comprehensive offerings to address a wider range of market opportunities Continued to transition its business model to balance between growth and profitability On-going transformation with investments in channel and sales capabilities US$ Million Q1 FY2017/18 Q1 FY2016/17 Q4 FY2016/17 Revenue 971 1, Pre-tax Loss Operational (114) (31) (110) Reported* (144) (64) (141) Pre-tax Income Margin (%) Operational (11.7)% (2.9)% (13.0)% Reported* (14.9)% (5.9)% (16.6)% * Included non-cash M&A-related accounting charges, such as intangible asset amortization, imputed interest expense of promissory notes and others 2017 Lenovo Internal. All rights reserved. 17

18 Appendix - Financial Summary - Condensed Consolidated Income Statement - Condensed Consolidated Balance Sheet - Condensed Consolidated Cash Flow Statement - Q1FY18 Performance by Geography

19 Financial Summary US$ Million Q1 FY2017/18 Q1 FY2016/17 Y/Y% Q4 FY2016/17 Q/Q% Revenue 10,012 10,056 (0%) 9,579 5% Gross Profit 1,365 1,534 (11%) 1,368 (0%) Operating Expenses (1,371) (1,289) 6% (1,294) 6% Operating (Loss)/ Profit (6) 245 N/A 74 N/A Other Non-Operating Expenses (63) (39) 60% (59) 8% Pre-tax (Loss)/Income (69) 206 N/A 15 N/A Taxation 15 (38) N/A 89 (83%) (Loss)/Profit for the period (54) 168 N/A 104 N/A Non-controlling interests (18) 5 N/A 3 N/A (Loss)/Profit attributable to Equity Holders (72) 173 N/A 107 N/A EPS (US cents) - Basic (0.66) 1.57 NA 0.97 NA - Diluted (0.66) 1.56 NA 0.97 NA Q1 FY2017/18 Q1 FY2016/17 Q4 FY2016/17 Gross margin 13.6% 15.3% 14.3% E/R ratio 13.7% 12.8% 13.5% Operating margin -0.1% 2.4% 0.8% PTI margin -0.7% 2.0% 0.2% Net margin attributable to Equity Holders -0.7% 1.7% 1.1% 19

20 Condensed Consolidated Income Statement US$ Million Q1 FY2017/18 Q1 FY2016/17 Revenue 10,012 10,056 Cost of sales (8,647) (8,522) Gross profit 1,365 1,534 Selling and distribution expenses (665) (589) Administrative expenses (460) (458) Research and development expenses (292) (356) Other operating income - net Operating (loss)/profit (6) 245 Finance income 9 6 Finance costs (72) (55) Share of profit of associated companies and joint ventures - 10 Profit/(loss) before taxation (69) 206 Taxation 15 (38) (Loss)/Profit for the period (54) 168 (Loss)/Profit attributable to: Equity holders of the company (72) 173 Perpetual securities holders 13 - Other non-controlling interests 5 (5) (Loss)/Earnings per share (US cents) - Basic (0.66) Diluted (0.66)

21 Condensed Consolidated Balance Sheet US$ Million As at As at Jun 30, 2017 Mar 31, 2017 Non-current assets 12,477 12,318 Property, plant and equipment 1,273 1,236 Intangible assets 8,317 8,349 Others 2,887 2,733 Current assets 14,150 14,868 Bank deposits and cash 1,541 2,951 Trade, notes and other receivables 9,182 8,870 Inventories 3,178 2,794 Others Current liabilities 18,053 18,334 Borrowings Trade, notes, other payables, accruals and provisions 16,072 17,364 Others 1, Net current liabilities 3,903 3,466 Non-current liabilities 4,396 4,757 Total equity 4,178 4,095 21

22 Condensed Consolidated Cash Flow Statement US$ Million Q1 FY2017/18 Q1 FY2016/17 Q4 FY2016/17 Net cash (used in)/generated from operating activities (577) 8 (26) Net cash (used in)/generated from investing activities (744) 34 (1,091) Net cash (used in)/generated from financing activities (67) (41) 1,319 (Decrease)/Increase in cash and cash equivalents (1,388) Effect of foreign exchange rate changes 20 (22) 30 Cash and cash equivalents at the beginning of the period 2,755 1,927 2,523 Cash and cash equivalents at the end of the period 1,387 1,906 2,755 22

23 Q1FY18 Performance by Geography China PCSD: Focus on product mix and ASP performance to mitigate the component cost increases Mobile: Continue to build more efficient foundation Data Center: Continue to transition its business model to balance between growth and profitability AP PCSD: Gained share in a weak traditional PC market Mobile: Strong new Moto product launch in India; continue to invest in channel expansion Data Center: On-going transformation with investments in channel and sales capabilities EMEA PCSD: Strong revenue growth with margin expansion thanks to solid performance from Western Europe Mobile: Better product mix driving higher ASP and profitability sequentially thanks to strong momentum in Western Europe Data Center: Revenue growth turned positive showing transformation efforts working; continue to invest in channel and sales capabilities AG (Americas) PCSD: Balance between profit and growth in NA Mobile: Strong momentum in LA (Shipment:+56% YTY; mkt share: 14.2% up 4.5pts); marketing investment in new product launches Data Center: Revenue growth turned positive showing transformation efforts working; continue to invest in channel and sales capabilities Q1 FY18 Revenue Segment Pretax Income/ (Loss) Segment Pretax Income Margin US$ Million US$ Million (%) Y/Y Q/Q China 2,515 (339) % 4.8% 2.8% AP 1,573 (107) (160) (42) 17 (43) (2.6)% 1.0% (2.5)% EMEA 2, (41) (49) (120) (1.5)% (2.0)% (4.6)% AG 3, % 1.3% 2.0% Q1 FY18 Q1 FY17 Q4 FY17 Q1 FY18 Q1 FY17 Q4 FY17 23

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