Slide 1: FY2007 4Q / Annual Results
Trend Micro FY2007. 4Q / Annual Results Mahendra Negi COO / CFO , Representative Director February 14, 2008
Slide 2: Forward Looking Statements
Forward Looking Statements Certain Statements that we make in this presentation are forward-looking statements. These forward- looking statements are based upon management’s current assumptions and beliefs in light of the information currently available to it, but involve known and unknown risks and
Slide 3: FY2007 4Q Financial Highlight
FY2007. 4Q Financial Highlight 3 Copyright 2008 - Trend Micro Inc.
Slide 4: Consolidated Results
Consolidated Results Three months (in million Yen) (unaudited) ended Dec 31, 4Q2006 4Q2007 YoY growth Net sales 23,231 26,213 13% Cost of sales 4,320 4,403 2% Operating expenses 11,324 13,508 19% Operating income (Margin) 7,587 (33%) 8,300 (32%) 9% Ordinary income 8,624 8,834 2% Net income 5,852 5,2
Slide 5: USD based Results (Non-GAAP)
USD based Results (Non-GAAP) (unaudited) Three months (in thousand USD) ended Dec 31, 4Q2006 4Q2007 YoY change Net sales 197,314 231,748 17% Cost of sales 36,697 38,931 6% Operating expenses 96,178 119,428 24% Operating income 64,439 73,388 14% Ordinary income 73,246 78,108 7% Net Income 49,704 46,2
Slide 6: Net Sales Growth by Region
Net Sales Growth by Region (in million Yen) (unaudited) 10,000 9,463 + 8% 9,000 8,776 4Q2006 8,000 + 21% + 14% 4Q2007 7,000 6,472 6,582 6,000 5,774 5,329 5,000 4,000 + 12% 2,832 3,000 2,534 2,000 + 6% 1,000 816 861 0 Japan US Europe Asia Pacific Latin America (In accordance with Japan GAAP) 6 Copyri
Slide 7: Net Sales Growth by Region (constant currency)
Net Sales Growth by Region If currency exchange rates used for 4Q2006 were used for 4Q2007: (in million Yen) (unaudited) * ( ) : difference from GAAP base 10,000 9,463 + 8% 9,000 8,776 (0) + 26% 4Q2006 8,000 (+264) + 7% 4Q2007 7,000 6,737 (-409) 6,172 6,000 5,774 5,329 5,000 + 8% 4,000 (-103) 3,000
Slide 8: % share by region
% share by region (unaudited) 4Q2006 4Q2007 23,231 million Yen 26,213 million Yen Latin Latin Asia America America Pacific 4% Asia Pacific 3% 11% 11% Japan Japan Europe 38% 38% Europe 36% 25% 25% US US 23% 25% (In accordance with Japan GAAP) 8 Copyright 2008 - Trend Micro Inc.
Slide 9: Sales by Segment
Sales by Segment (unaudited) (in million Yen) YoY growth 24,000 Large Enterprise + 31% 9,588 20,000 7,301 16,000 Small & Medium - 8% 12,000 9,845 10,733 8,000 Consumer + 30% 4,000 5,196 6,779 0 4Q2006 4Q2007 (Non-GAAP) 9 Copyright 2008 - Trend Micro Inc.
Slide 10: Bookings (Amount of contracts concluded)
Bookings (Amount of contracts concluded) (in million Yen) (unaudited) 12,000 + 11% 11,000 10,654 + 8% 10,000 9,635 9,699 4Q2006 + 3% 8,968 9,000 4Q2007 7,661 8,000 7,430 7,000 6,000 5,000 + 2% 4,000 3,002 3,066 3,000 - 19% 2,000 1,079 872 1,000 0 Japan US Europe Asia Pacific Latin Am erica * “Bookin
Slide 11: Bookings (Amount of contracts concluded)
Bookings (Amount of contracts concluded) If currency exchange rates used for each previous Q were applied to each Q4’s deferred revenue balance amount (unaudited) (in million Yen) 12,000 + 11% 11,000 10,654 + 11% 10,000 9,635 4Q2006 9,386 9,000 + 8% 8,419 4Q2007 8,000 7,866 7,278 7,000 6,000 5,000 +
Slide 12: Cost of sales & Operating expenses
Cost of sales & Operating expenses (excluding both stock option expenses and amortization of goodwill goodwill effects) (in million Yen) (unaudited) Cost of sales (old) ※ Amortization of capitalized software, and Material Maintenance Support 20,000 Sales, Marketing R&D 18,000 Administrative 1,116 16
Slide 13: Bookings vs Total costs
Bookings vs Total costs (in million Yen) (unaudited) Bookings Total Costs 32,000 30,000 31,954 28,000 30,116 29,867 26,000 27,663 24,000 24,999 22,000 20,000 18,000 16,000 17,912 16,269 16,264 14,000 15,644 15,883 12,000 10,000 8,000 6,000 4,000 2,000 0 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 * “Total co
Slide 14: Operating income margin vs Bookings based margin
Operating income margin vs Bookings based margin (unaudited) FY2006 FY2007 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Operating income margin 39% 32% 34% 33% 32% 35% 35% 32% ”Profit = Net sales – (COGS+SG&A)” Bookings based margin 45% 37% 41% 48% 43% 46% 35% 44% ”Profit = Bookings – (COGS+SG&A)” Operating income margi
Slide 15: Impact of multi year package on FY2008 bookings for Japanese consumer business
The impact of multi year package on FY2008 bookings for Japanese consumer business • Japanese consumer’s bookings of multi year version amounts to approximately 7 billion yen for full year 2007. • This amount will not show up in FY2008 renewals, leading to a “decline” in YoY growth momentum of booki
Slide 16: Q4 Highlights
Q4 Highlights • Growing market share while maintaining margins • Strong growth in ENT and CON CBU • Recovery of retail market share in JP 16 Copyright 2008 - Trend Micro Inc.
Slide 17: Q4 Lowlights
Q4 Lowlights • Weakness in SMB business • Shrinkage of retail market in Japan 17 Copyright 2008 - Trend Micro Inc.
Slide 18: Headcount
Headcount Sep - 2007 Dec - 2007 3,527 3,664 ADM, ADM, Business Process Business Process Sales, Sales, 513 523 Marketing Marketing 1,023 + 137 1,056 Technical (+ 4%) Technical Support Support 1,059 Research, 1,093 Research, Development Development 932 992 18 Copyright 2008 - Trend Micro Inc.
Slide 19: Non-operating Items
Non-operating Items (unaudited) Other income Exchange loss Equity in gains of affiliated comapanies Gain on sales of marketable securities 204 M Loss on sales of marketable securities 10 M 579M 126M Interest expense Interest income 51M Other expense 9M 60 M 894M Ordinary Income Operating income 8,83
Slide 20: Balance Sheet
Balance Sheet (unaudited) (in million Yen) Sep-2007 change Dec-2007 Assets Cash & cash equivalents 68,270 - 14,179 54,091 Account receivable (less allowance for doubtful accounts) 19,782 + 6,062 25,844 Marketable securities & Securities investments 70,636 + 14,714 85,350 Liabilities Deferred revenue
Slide 21: A snapshot of our CDO investments
A snapshot of our CDO investments # We don’t have any CDOs related to RMBS (e.g. Subprime mortgages). # Since the underlying cash flow is intact, we intend to hold till maturity. # Exposure as a % of our “Marketable securities & Securities investments” : 5% # Exposure as a % of our “Cash + Marketabl
Slide 22: FY2007 Annual Financial Highlight
FY2007 Annual Financial Highlight * We have applied to Japan GAAP since this fiscal year. 22 Copyright 2008 - Trend Micro Inc.
Slide 23: Consolidated Results (Annual)
Consolidated Results (Annual) Fiscal year (in million Yen) (unaudited) ended Dec 31, FY2006 FY2007 YoY growth Net sales 85,613 99,805 17% Cost of sales 15,152 17,220 14% Operating expenses 41,101 49,108 19% Operating income (Margin) 29,359 (34%) 33,476 (34%) 14% Ordinary income 31,902 38,096 19% Net
Slide 24: Net Sales Growth by Region
Net Sales Growth by Region (in million Yen) (unaudited) 40,000 + 10% 36,531 FY2006 35,000 33,248 FY2007 30,000 + 30% + 15% 25,033 24,350 25,000 21,150 20,000 19,295 15,000 + 17% 10,708 10,000 9,148 15% 5,000 2,771 3,182 0 Japan US Europe Asia Pacific Latin America (In accordance with Japan GAAP) 24
Slide 25: Net Sales Growth by Region (constant currency)
Net Sales Growth by Region If currency exchange rates used for FY2006 were used for FY2007: (in million Yen) (unaudited) * ( ) : difference from GAAP base 40,000 + 10% 36,531 (0) 35,000 33,248 FY2006 + 29% 30,000 FY2007 (-227) + 5% 24,805 (-2,148) 25,000 22,201 21,150 20,000 19,295 + 11% 15,000 (-59
Slide 26: Bookings (Amount of contracts concluded)
Bookings (Amount of contracts concluded) (in million Yen) (unaudited) 50,000 + 18% 45,000 43,135 FY2006 40,000 36,443 FY2007 35,000 + 14% + 14% 30,000 28,586 27,652 25,118 24,276 25,000 20,000 + 19% 15,000 12,003 10,000 10,118 - 0% 5,000 3,112 3,106 0 Japan US Europe Asia Pacific Latin Am erica * “B
Slide 27: Sales by Segment
Sales by Segment (unaudited) (in million Yen) YoY growth 100,000 90,000 Large Enterprise + 29% 80,000 31,816 70,000 24,739 Small & Medium + 4% 60,000 50,000 42,110 Consumer + 26% 40,000 40,299 30,000 20,000 10,000 20,574 25,878 0 FY2006 FY2007 (Non-GAAP) 27 Copyright 2008 - Trend Micro Inc.
Slide 28: Cost of sales & Operating expenses
Cost of sales & Operating expenses (excluding both stock option expenses and amortization of goodwill goodwill effects) (unaudited) (in million Yen) FY 2006 FY 2007 70,000 4,366 Cost of sales (old) * 7% 7% 60,000 3,376 Maintenance 6% 5% 4,101 9,277 50,000 3,150 Support 14% 14% 7,821 Sales, Marketing
Slide 29: Trend Micro's Cash Dividends policy
Trend Micro’s Cash Dividends policy We are increasing the dividend payout ratio for 2007 dividends to 60%. To maintain a “real” pay-out ratio of 60% excluding the impact of non-cash stock option expenses, we will be adding these expenses back to accounting Net Income for pay-out calculations. (stand
Slide 30: Cash Dividends for FY2007
Cash Dividends for FY2007 (unaudited) Stock Option Expense Dividends for FY2007 1,394M Total : 14,992 Million Yen 60% 60% X (23,561 (23,561M M + 1,394M) 1,394M) 100% Per share : 111 Yen Net Income (+ 32% YoY) 23,561M FY2006: FY2006: 84 Yen per share * Subject to the approval at the Ordinary General
Slide 31: Return for Shareholders in FY2007
Return for Shareholders in FY2007 (unaudited) 1. Dividends* : 14,992 Million Yen 2. Buyback (done) : 2,533 Million Yen Total : 17,525 Million Yen （ 74% as Return based on Net Income in 2007） * Subject to the approval at the Ordinary General Meeting of Shareholders scheduled in late March, 2008 Buyba
Slide 32: Industry growth
Industry growth Worldwide Security Product and Service Revenue (in million $) + 13% 80,000 71,773 70,000 (2006-2011 CAGR 15%) + 14% + 15% 63,379 60,000 + 16% 55,574 + 17% 50,000 48,357 41,668 40,000 35,686 30,000 20,000 10,000 0 2006 2007 2008 2009 2010 2011 (Source: IDC, 2007 “Worldwide IT Security
Slide 33: Q1 forecast assumptions
Q1 forecast assumptions • Japan growth higher than average, North America and EMEA lower than average (in JPY terms). • Stock option expenses will be 0.5Bn yen • Estimated exchange rate: 1USD = 105 yen ( last year: 119 yen) 1EUR = 155 yen ( last year: 155 yen) 33 Copyright 2008 - Trend Micro Inc.
Slide 34: Projection for 1Q2008
Projection for 1Q2008 (unaudited) For 1Q2008 Expected (in million Yen) Jan - Mar, 2008 YoY growth Net Sales 25,100 8% Operating Income 6,600 - 10% Ordinary Income 7,000 - 15% Net Income 4,100 - 19% (In accordance with Japan GAAP) • Including both stock option expenses and amortization of goodwill （a
Slide 35: Regression chart of net sales
Regression chart of net sales (in million Yen) Regression line 30,000 25,000 20,000 15,000 10,000 R 2 = 0.9778 5,000 0 08Q1e 02Q1a 02Q2a 02Q3a 02Q4a 03Q1a 03Q2a 03Q3a 03Q4a 04Q1a 04Q2a 04Q3a 04Q4a 05Q1a 05Q2a 05Q3a 05Q4a 06Q1a 06Q2a 06Q3a 06Q4a 07Q1a 07Q2a 07Q3a 07Q4a (Non-GAAP) 35 Copyright 2008 -
Slide 36: Appendix
Appendix 36 Copyright 2008 - Trend Micro Inc.
Slide 37: Appendix: Quarterly Chart (1)
Appendix Quarterly Chart (1) (unaudited) (in million Yen) FY2 0 0 6 FY2 0 0 7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Ｎｅｔ sale s 20,778 20,447 21,156 23,231 23,252 25,138 25,201 26,213 Co st o f sale s 3,368 3,732 3,731 4,320 4,298 4,241 4,276 4,403 O pe r at in g e xpe n se s 9,316 10,249 10,211 11,324 11,584 12,0
Slide 38: Appendix: Quarterly Chart (2)
Appendix Quarterly Chart (2) (unaudited) (in million Yen) FY2006 FY2007 （ Sales by region） Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Japan 8,028 8,127 8,315 8,776 8,538 9,241 9,287 9,463 US 4,818 4,249 4,897 5,329 5,788 6,304 6,467 6,472 Europe 5,123 5,133 5,118 5,774 5,825 6,013 5,929 6,582 Asia Pacific 2,165 2,270
Slide 39: Thank You
Thank You 39 Copyright 2008 - Trend Micro Inc.