Lenovo Group Limited · HKEX:992
Lenovo — Q1 2023 Earnings Presentation
36 slides from Lenovo's earnings presentation, Aug 10, 2022
Slide 1: Q1FY23 Earnings Announcement
Q1FY23 Earnings Announcement August 10, 2022 2022 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 August 10, 2022 2022 Lenovo Internal. All rights reserved.
Slide 4: Group: New Engines Driving Growth & Profitability
Group: New Engines Driving Growth & Profitability • 9 consecutive quarters of revenue & profitability improvement • 37% revenue mix of Non-PC 2022 Lenovo Internal. All rights reserved. Source: Internal 4
Slide 5: Group: Opportunities
Opportunities Group: New Engines Driving Accelerated Digital/Intelligent Growth & Profitability transformations: • Hybrid work model to stay • Strong, sustainable demand for: • Smart devices/IoT • Smart infrastructure • Intelligent applications and services 2022 Lenovo Internal. All rights reserved.
Slide 6: Group: Performance
Performance Group: Group Net Income ($M) Non-HKFRS Net Income1 ($M) New Engines Driving +11% +35% Growth & Profitability 1.2 9.6% 1.2 556 516 600 600 1 1 500 466 500 0.8 413 0.8 400 400 0.6 0.6 300 300 0.4 0.4 200 200 • Net income $516 million, up 0.2 0.2 100 100 0 0 0 0 Q1 21/22 Q1 22/23 Q1 21/22 Q
Slide 7: New Growth Engines Revenue: SSG, ISG, MBG
Performance Group: New Engines Driving Growth & Profitability SSG Revenue($M) ISG Revenue($M) MBG Revenue($M) 21% 14% • New growth engines all saw 2,086 2,175 23% double-digit revenue YTY growth 1,835 1,797 • SSG1: up 23% YTY 1,456 1,184 • ISG2: up 14% YTY • MBG3: up 21% YTY Q1 21/22 Q1 22/23 Q1 21/
Slide 8: Group: Sustainable growth
Sustainable growth Group: New Engines Driving ⚫ R&D investment up 10% YTY, Growth & Profitability headcount up 29% YTY ⚫ Realizing ESG goals ⚫ Strengthen One Lenovo platform 2022 Lenovo Internal. All rights reserved. Source: Internal 8
Slide 9: SSG Strong Growth, Higher Margin: Opportunities
Opportunities SSG Trillion-dollar IT services market Solutions & Services Group: keeps expanding Strong Growth, • Hybrid work model drives Premier & Higher Margin Custom fulfillment services demand • Digital workplace drives as-a-Service demand • Smart vertical solutions grow at double-digit CAGR th
Slide 10: SSG Performance
Performance SSG SSG Operating Profit ($M) & SSG Revenue ($M) Solutions & Services Group: Margin (%) 23% Strong Growth, 25% 1,184 1,456 Higher Margin 350 250 264 329 0.29 0.27 0.25 150 22.6% 0.23 22.3% 0.21 • Operating margin 22.6%, 0.19 50 0.17 -50 Q1 21/22 Q2 21/22 Q3 21/22 Q4 21/22 Q1 22/23 0.15 o
Slide 11: SSG: Sustainable growth
Sustainable growth SSG Solutions & Services Group: Strong Growth, • Invest in software tools, platforms and vertical solutions Higher Margin • Expand TruScale portfolio to Digital Workplace solutions market • Launch hybrid/multi-cloud solutions • Develop sustainability offerings • Expand footprint w
Slide 12: ISG Opportunities
ISG Opportunities Infrastructure Solutions Group: Record Revenue, ICT Infrastructure upgrade continues Steady Profit Improvement By 2025: • Server growth at double-digit CAGR • Edge infrastructure to exceed $41 billion • Storage to reach $36 billion Lenovo’s strategic intent: Full-stack infrastructu
Slide 13: ISG Performance
ISG Performance Infrastructure Solutions Group: ISG Revenue ($M) Record Revenue, +14% Steady Profit Improvement 1,835 2,086 • First $2 billion revenue quarter, up 14% YTY • Profitable for 3 straight quarters Q1 21/22 Q2 21/22 Q3 21/22 Q4 21/22 Q1 22/23 • CSP1: Record revenue, outgrew ISG Operating R
Slide 14: ISG: Sustainable growth
ISG Sustainable growth Infrastructure Solutions Group: Record Revenue, • End-to-end infrastructure provider Steady Profit Improvement • Invest in portfolio & innovation, particularly in Edge & Services • Drive in-house motherboard design & manufacturing • Balance scale & profitability 2022 Lenovo In
Slide 15: IDG Opportunities
Opportunities IDG Intelligent Devices Group: Hybrid work model brings growth Market Leader opportunities Driven by Innovation • PC: TAM to be higher than pre- pandemic level in longer term • Smartphone/Tablet: Expansion opportunity • Smart Collaboration: expected to exceed $80 billion by 2025 Lenovo
Slide 16: IDG Performance
Performance IDG IDG Operating Profit ($M) IDG Revenue ($M) Intelligent Devices Group: & Margin(%) Market Leader 1400 10.0% 14,666 14,274 1200 1,095 1,070 9.0% 1000 Driven by Innovation 8.0% 800 7.0% 600 7.5% 7.5% 6.0% 400 5.0% 200 • Operating profit over $1 billion, 0 4.0% -200 Q1 21/22 Q2 21/22 Q3
Slide 17: IDG Mobile Revenue by Region
Performance IDG NA MBG Revenue LA MBG Revenue Intelligent Devices Group: YTY growth YTY growth Market Leader 14% 21% Driven by Innovation • Mobile: revenue up 21% YTY • NA: up 14% YTY Q1 21/22 Q1 22/23 Q1 21/22 Q1 22/23 • LA: up 21% YTY EMEA MBG Revenue AP MBG Revenue • EMEA: up 24% YTY YTY growth Y
Slide 18: IDG: Sustainable growth
Sustainable growth IDG Intelligent Devices Group: Market Leader • Invest in innovation from smart devices to smart collaboration to Driven by Innovation smart spaces • Focused on innovative form-factors, extreme performance, adaptive intelligence, security, etc. • Provide seamless connection & colla
Slide 19: Client-Edge-Cloud-Network-Intelligence
Based on New IT architecture of “Client-Edge-Cloud-Network-Intelligence” • Smart Devices to Smart Spaces • Computer to Computing • Traditional IT to Digital Industries • Human to Planet 2022 Lenovo Internal. All rights reserved. 19
Slide 20: Transcend the Cycle
Transcend the Cycle • Right Strategy & Strong Execution • Agility & Resilience 2022 Lenovo Internal. All rights reserved. 20
Slide 21: Wong Wai Ming, Chief Financial Officer
Wong Wai Ming Chief Financial Officer August 10, 2022 2022 Lenovo Internal. All rights reserved. *all figures in the following slides are in million US$ unless otherwise stated
Slide 22: Resilient Growth Amid Challenges
Resilient Growth Amid Performance Challenges Revenue 1,000 Net Income1 120.0% Flat YTY 900 +11% YTY • Digital Transformation was a strong 800 640 100.0% 20,127 700 80.0% driver for structural growth despite short- 16,929 17,869 16,694 16,956 600 466 512 516 60.0% 500 412 term headwinds; revenue rema
Slide 23: Robust Working Capital Management, Bond Issuing
Robust Working Performance Capital Management Net Cash / (Debt) 602 Total Debt -14% YTY 394 6,000 • Maintained robust net cash position for 81 5,000 4,000 3,998 3,791 3,748 3,421 3,452 the 3rd consecutive quarter at $394mn -60 3,000 2,000 • Extended the average debt maturity by -739 1,000 - 2 years
Slide 24: SSG Performance
SSG Performance Solutions & Services Group Revenue Deferred Revenue 2,500 +23% YTY +20% YTY 2,000 2,777 2,900 2,918 • Revenue and operating profit maintained 1,500 1,184 1,363 1,498 1,396 1,456 2,430 2,571 strong growth above 20% YTY; double- 1,000 digit YTY revenue growth for all three 500 services
Slide 25: ISG Performance
ISG Performance Infrastructure Solutions Group Revenue • Multiple records in Q1: 3,000 +14% YTY 2,500 • All-time record revenue – 1st 2,000 1,835 1,968 1,929 2,086 time over $2 billion 1,500 1,409 1,000 • Record revenue in CSP – 500 - outperformed market by 11 pts Q1 21/22 Q2 21/22 Q3 21/22 Q4 21/22
Slide 26: IDG Performance
IDG Performance Intelligent Devices Group1 IDG Revenue Mobile Revenue -3% YTY • Premium-to-market growth for the PC 20,000 +21% YTY 17,610 segment despite challenges in supply 18,000 16,000 14,666 15,339 14,696 14,274 and consumer demand 14,000 12,000 2,500 1,797 1,931 2,217 1,957 2,175 2,000 10,000
Slide 27: Continuous R&D Spending to Drive Innovation and Margin Improvement
Performance Continuous R&D Spending to Drive R&D Expenses and Ratio to Revenue Innovation and 1,500 1,300 3.4% 3.0% 4.0% 3.5% Margin Improvement 1,100 900 2.8% 2.7% 2.7% +10% YTY 3.0% 2.5% 700 549 576 2.0% 466 482 511 • R&D spending grew 10%, contributing to 500 1.5% 300 1.0% operating margin improv
Slide 28: ESG Updates
ESG Updates Expanded use of Closed-loop post-consumer recycled (PCR) 90% content to 100% of our global operations’ 248 products of PC products will contain PCR content by FY 25/26 electricity will be obtained from renewable sources by FY Environmental in FY21/22 25/261 Began Global Partnership with
Slide 29: Outlook
Outlook Group Mission is to Lead and Enable Intelligent Transformation Improve net income margin in medium term; Drive R&D to turbocharge innovation; Increase brand premium; Mitigate short-term challenges from supply disruption and macro uncertainties; Leverage IT spending on Digital Transformation
Slide 30: Supplemental Financial Materials
Supplemental Financial Materials - Financial Summary - Condensed Consolidated Income Statement - Condensed Consolidated Balance Sheet - Condensed Consolidated Cash Flow Statement - Supplemental Non-HKRFS Measures 2022 Lenovo Internal. All rights reserved. 30
Slide 31: Financial Summary
Financial Summary US$ Million Q1 21/22 Q1 22/23 Y/Y% Revenue 16,929 16,956 0% Gross profit 2,824 2,869 2% Operating expenses (2,081) (2,092) 1% Operating profit 743 777 5% Operating profit (non-HKRFS) 675 813 21% Other non-operating expenses (93) (86) -8% Profit before taxation 650 691 6% Profit bef
Slide 32: Condensed Consolidated Income Statement
Condensed Consolidated Income Statement US$ Million Q1 21/22 Q1 22/23 Revenue 16,929 16,956 Cost of sales (14,105) (14,087) Gross profit 2,824 2,869 Selling and distribution expenses (847) (879) Administrative expenses (812) (688) Research and development expenses (466) (511) Other operating income/
Slide 33: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet US$ Million As of Jun 30, 2021 As of Jun 30, 2022 Current assets 25,510 29,105 Bank deposits and cash 3,259 3,846 Trade, notes and other receivables 14,028 15,917 Inventories 7,826 8,868 Others 397 474 Non-current assets 14,951 15,143 Property, plant and equipmen
Slide 34: Condensed Consolidated Cash Flow Statement
Condensed Consolidated Cash Flow Statement US$ Million Q1 21/22 Q1 22/23 Net cash generated from operating activities 448 399 Net cash used in investing activities (192) (388) Net cash used in financing activities (180) (8) Increase in cash and cash equivalents 76 3 Effect of foreign exchange rate c
Slide 35: Supplemental Non-HKRFS Measures
Supplemental Non-HKRFS Measures US$ Million Q1 21/22 Q1 22/23 Profit before Profit for the Profit Profit before Profit for the Profit Operating profit taxation period attributable to Operating profit taxation period attributable to equity holders equity holders As reported 743 650 485 466 777 691 53
Slide 36: Smarter technology thanks. Lenovo
Smarter technology thanks. Lenovo