Lenovo Group Limited · HKEX:992
Lenovo — Q4 2023 Earnings Presentation
35 slides from Lenovo's earnings presentation, May 25, 2023
Slide 1: Q4 and FY22/23 Earnings Announcement
Q4 and FY22/23 Earnings Announcement May 24, 2023 2023 Lenovo Internal. All rights reserved.
Slide 2: Forward-Looking Statement
Forward-Looking Statement This presentation contains “forward-looking statements”, which are statements that refer to the expectations and plans for the future and include, without limitation, statements regarding Lenovo’s future results of operations, financial condition or business prospects as we
Slide 3: Yuanqing Yang, Chairman & CEO
Yuanqing Yang Chairman & CEO May 24, 2023 2023 Lenovo Internal. All rights reserved.
Slide 4: Group: Stable Profitability, Steady Transformation
Group: Stable Profitability, Steady Transformation • Market condition evolved within our expectations among uncertainties • Steady progress in service-led transformation and technology-driven innovation • Stable profitability driven by diversified growth engines and operational resilience 2022 Lenov
Slide 5: Group Opportunities
Group: Opportunities Stable Profitability, Continued acceleration of Steady Transformation Digital/Intelligent transformations: • Device market inventory correction coming to an end to resume growth in 2H2023 • Cloud and the entire computing infrastructure demand increasing • IT service market to re
Slide 6: Group Performance of FY2022/2023
Group: Performance of FY2022/2023 Stable Profitability, Group Net Income ($M) & Net Margin (%) Group Revenue ($M) (non-HKFRS ) Steady Transformation 60,742 71,618 61,947 51,038 50,716 • Net margin 3%, flat YTY (non- 9.6% 2,164 1500 1,878 0.4 HKFRS) 1400 1300 1200 1100 1000 1,330 0.35 0.3 0.25 900 80
Slide 7: Group: Sustainable growth
Group: Sustainable growth Stable Profitability, Steady Transformation ⚫ Continue investment in R&D around New IT architecture ⚫ Deepen ESG commitment ⚫ Proactive expense actions to mitigate risks 2022 Lenovo Internal. All rights reserved. 2023 Source: Internal 7
Slide 8: SSG Opportunities
SSG Opportunities Solutions & Services Group: Trillion-dollar IT services market High Margin, keeps expanding Strong Growth By 2025: • DaaS market to grow at double digits • Cloud solution market to grow at 18% CAGR • Vertical solutions & services spending steady growth Lenovo’s strategic intent: Sc
Slide 9: SSG Performance of FY2022/2023
SSG Performance of FY2022/2023 Solutions & Services Group: SSG Operating Profit ($M) SSG Revenue ($M) & Operating Margin (%) High Margin, +22% 6,663 Strong Growth +16% 5,442 1500 1,392 0.4 • Record revenue $6.7 billion, 1,195 1400 1300 0.35 1200 0.3 1100 1000 0.25 900 up 22% YTY 800 0.2 700 22% 600
Slide 10: SSG Sustainable growth
SSG Sustainable growth Solutions & Services Group: High Margin, • Build scalable and repeatable horizontal Strong Growth solutions with Lenovo IPs to deploy in vertical industries • Enrich Digital Workplace Solutions • Develop TruScale Hybrid Cloud solutions portfolio & other aaS • Grow sustainabili
Slide 11: ISG Opportunities
ISG Opportunities Infrastructure Solutions Group: Record Revenue, ICT Infrastructure upgrade continues Record Profit and By 2025: Hypergrowth • Server to reach $132 billion • Storage to reach $36 billion • Edge infrastructure to reach $37 billion Lenovo’s strategic intent: Comprehensive infrastructu
Slide 12: ISG Performance of FY2022/2023
ISG Performance of FY2022/2023 Infrastructure Solutions Group: ISG Operating Profit ($M) ISG Revenue ($M) Record Revenue, & Operating Margin (%) +37% Record Profit and 9,756 Hypergrowth +1363% 7,140 120 98 0.05 100 0.04 80 • Record operating profit $98 million 0.03 60 0.02 40 1% • Record revenue $9.
Slide 13: ISG Sustainable growth
ISG Sustainable growth Infrastructure Solutions Group: Record Revenue, • Strengthen in-house manufacturing Record Profit and Hypergrowth • Improve full stack product capabilities supporting both CSP* & E/SMB** • Invest in infrastructure innovations empowered by A.I. *CSP: Cloud Service Provider 2022
Slide 14: IDG Opportunities
IDG Opportunities Intelligent Devices Group: Leading Market Digitalization & Hybrid work model bring growth opportunities Position and Profitability • Smart devices: • PC: return to YTY growth in 2H 2023 and accelerate in 2024 • Smartphone: resume growth gradually • Smart Spaces solutions steadily g
Slide 15: IDG Performance of FY2022/2023
IDG Performance of FY2022/2023 Intelligent Devices Group: IDG Operating Profit ($M) IDG Revenue ($M) Leading Market & Operating Margin(%) 62,310 Position and 49,371 Profitability 5500 4,738 10.0% 9.0% 4500 3,598 8.0% 3500 • PC: maintained global #1, premium 2500 7.6% 7.3% 7.0% 6.0% mix 30% 1500 5.0%
Slide 16: IDG Sustainable growth
IDG Sustainable growth Intelligent Devices Group: Leading Market • Manage expense, sharpen operational Position and excellence Profitability • Invest in innovations of premium offerings & adjacent areas • Enhance smart space solutions for hybrid work model 2022 Lenovo Internal. All rights reserved.
Slide 17: Q4: Holding Strong in a Challenging Market
Performance of FY2022/2023 Q4 Q4: Holding Strong in Group Net Income ($M) & Net Margin (%) (non-HKFRS ) a Challenging Market 507 • Net margin 2.3% (non-HKFRS) 3.0% 284 2.3% despite the most challenging Q4 21/22 Q1 22/23 Q2 22/23 Q3 22/23 Q4 22/23 quarter of the year Net income Net income margin • Di
Slide 18: Fully prepared to capture the next growth opportunities
Fully prepared to capture the next growth opportunities Clear Operational Invest for Strategy Excellence the Future 2022 Lenovo Internal. All rights reserved. 18
Slide 19: Wong Wai Ming, Chief Financial Officer
Wong Wai Ming Chief Financial Officer May 24, 2023 2023 Lenovo Internal. All rights reserved. *all figures in the following slides are in million US$ unless otherwise stated
Slide 20: Diversified Growth Engines
Diversified Growth Performance – FY22/23 Engines Revenue Gross Profit Margin 71,618 • 18-year record gross and operating 60,742 20,000 61,947 20,000 16.5% 16.8% 17.0% 17.5% 17.0% 51,038 50,716 16.1% 16.5% margin. Sustained steady YTY non- 20,000 19,999 16.0% 15.5% HKFRS net margin at 3% 19,999 19,99
Slide 21: Accelerated Non-PC Growth Opportunities
Accelerated Non-PC Performance – Q4 FY22/23 Growth Opportunities Revenue Gross Profit Margin • Non-PC1 sales contribution to business 16,694 16,956 17,090 8,000 17.5% 17.2% 17.1% group revenue mix rose sharply to 43%, 15,267 8,000 8,000 16.9% 16.8% 17.0% 17.0% up 12 pts YTY 7,999 12,635 16.5% 7,999
Slide 22: Strong Working Capital Management
Strong Working Performance Capital Management Cash and Borrowings Net Cash/(Debt) 602 6,000 2,663 3,551 366 4,250 • Maintained net cash position at 4,000 3,068 3,930 $366mn in a volatile environment with 2,000 - cash levels over $4bn, up $320mn YTY -2,000 -870 -1,242 -1,647 • Cash conversion cycle i
Slide 23: SSG Performance
SSG Performance Solutions & Services Group Revenue 6,663 2,500 7,000 • Double-digit revenue growth and profit 6,000 4,193 5,442 2,000 1,396 1,456 1,721 1,836 1,650 5,000 1,500 margin since formation of SSG 4,000 3,000 1,000 • Revenue up 22%YTY in FY22/23 2,000 500 1,000 - - • Operating profit margin
Slide 24: ISG Performance
ISG Performance Infrastructure Solutions Group Revenue • Consistently outperforming the market 12,000 9,756 3,000 2,855 10,000 2,614 with new milestones: 8,000 7,140 2,500 2,086 2,200 6,301 2,000 • Record revenue and operating profit 6,000 1,500 1,409 4,000 1,000 • Revenue up 37% YTY 2,000 500 • 8th
Slide 25: IDG Performance
IDG Performance Intelligent Devices Group1 Revenue 70,000 62,310 14,696 • Revenue fell 21% YTY while operating 60,000 53,007 49,371 14,274 13,716 16,000 50,000 14,000 11,586 12,000 9,796 40,000 profit margin stabilized at 7.3% thanks to 30,000 10,000 8,000 20,000 6,000 operational excellence and dis
Slide 26: Continued R&D Investment to Drive Innovation
Performance Continued R&D Investment to Drive R&D Expenses and Ratio to Revenue Innovation 4,000 3,500 3.5% 1,500 4.0% 1,300 3.5% 3.4% 3.0% 3.3% 3.8% 4.3% 5.0% 4.0% 2.9% 1,100 3.0% 3,000 3.0% • R&D expense to revenue ratio jumped to 2,500 2.4% 2,073 2,195 900 2.5% 2.0% 700 579 3.5% in FY23, from 2.9
Slide 27: ESG Updates
ESG Updates Recognized by CDP as Among the first 139 Leader2 in Climate Expanded the use of CL companies with net-zero Change, Water Security, PCC plastic to 298 targets validated by SBTi1 Supplier Engagement for products3 Environmental two consecutive years 250,000+ beneficiaries to Recognized by B
Slide 28: Outlook
Outlook Group Mission is to Lead and Enable Intelligent Transformation Improve net income margin in the medium-term; Drive R&D to turbocharge innovation; Increase brand premium; Mitigate short-term challenges amid macro uncertainties; Leverage IT spending on Digital Transformation SSG: Serve as a Ne
Slide 29: Supplemental Financial Materials
Supplemental Financial Materials - Financial Summary - Condensed Consolidated Income Statement - Condensed Consolidated Balance Sheet - Condensed Consolidated Cash Flow Statement - Supplemental Non-HKFRS Measures 2023 Lenovo Internal. All rights reserved. 29
Slide 30: Financial Summary
Financial Summary US$ Million Q4 21/22 Q4 22/23 Y/Y% FY21/22 FY22/23 Y/Y% Revenue 16,694 12,635 -24% 71,618 61,947 -14% Gross profit 2,864 2,143 -25% 12,049 10,501 -13% Operating expenses (2,275) (1,852) -19% (8,968) (7,832) -13% Operating profit 589 291 -51% 3,081 2,669 -13% Operating profit (non-H
Slide 31: Condensed Consolidated Income Statement
Condensed Consolidated Income Statement US$ Million Q4 21/22 Q4 22/23 FY21/22 FY22/23 Revenue 16,694 12,635 71,618 61,947 Cost of sales (13,829) (10,492) (59,569) (51,446) Gross profit 2,864 2,143 12,049 10,501 Selling and distribution expenses (963) (648) (3,746) (3,285) Administrative expenses (70
Slide 32: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet US$ Million As of Mar 31, 2022 As of Mar 31, 2023 Current assets 28,997 22,941 Bank deposits and cash 4,023 4,321 Trade, notes and other receivables 16,303 11,886 Inventories 8,301 6,372 Others 370 362 Non-current assets 15,514 15,979 Property, plant and equipmen
Slide 33: Condensed Consolidated Cash Flow Statement
Condensed Consolidated Cash Flow Statement US$ Million Q4 21/22 Q4 22/23 FY21/22 FY22/23 Net cash generated from operating activities 1,462 244 4,077 2,801 Net cash used in investing activities (574) (314) (1,499) (1,914) Net cash used in financing activities (750) (729) (1,757) (414) Increase/(decr
Slide 34: Supplemental Non-HKFRS Measures
Supplemental Non-HKFRS Measures US$ Million Q4 21/22 Q4 22/23 Profit Profit Profit Profit Operating Profit before for the attributable Operating Profit before for the attributable profit taxation period to equity profit taxation period to equity holders holders As reported 589 520 421 412 291 130 10
Slide 35: Smarter technology thanks. Lenovo
Smarter technology thanks. Lenovo