Slide 1: Trend Micro FY2006 3Q Results
Trend Micro FY2006. 3Q Results Mahendra Negi COO / CFO , Representative Director October 31, 2006 TRENDMICRO AppletTrap eDoctor INTERSCAN VIRUSWALL Trend Virus Control System VSAPI eManager PC-cillin Interscan eManager MacroTrap ISVW TVCS InterScan On-Line Scan GateLock ISWM InterScanWebManager Inte
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: Consolidated Results
Consolidated Results (unaudited) Three months (in million Yen) ended Sep 30, 3Q2005 3Q2006 YoY growth Net sales 17,975 21,002 17% Cost of sales 2,739 3,886 42% Operating expenses 8,374 11,005 31% Operating income (Margin) 6,862 (38%) 6,111 (29%) - 11% Income before taxes 7,240 6,904 - 5% Net Income
Slide 4: USD based Results (Non-GAAP)
USD based Results (Non-GAAP) (unaudited) Three months (in thousand USD) ended Sep 30, 3Q2005 3Q2006 YoY change Net sales 161,586 180,539 12% Cost of sales 24,625 33,404 36% Operating expenses 75,278 94,601 26% Operating income 61,683 52,534 - 15% Income before taxes 65,083 59,352 - 9% Net Income 39,
Slide 5: Net Sales Growth by Region
Net Sales Growth by Region (unaudited) (in million Yen) 9,000 8,068 + 16% 8,000 3Q2005 7,000 6,942 3Q2006 6,000 + 19% 5,139 + 17% 4,970 5,000 4,182 4,391 4,000 3,000 2,178 + 12% 1,943 2,000 + 25% 1,000 517 647 0 Japan US Europe Asia Pacific Latin America (In accordance with US GAAP) Copyright © 2006
Slide 6: Net Sales Growth by Region (constant currency)
Net Sales Growth by Region If currency exchange rates used for 3Q2005 were used for 3Q2006: (unaudited) (in million Yen) * ( ) : difference from GAAP base 9,000 8,068 +(0)16% 8,000 6,942 3Q2005 7,000 3Q2006 6,000 + 7% 5,000 4,752 + 14% 4,706 (-433) 4,182 (-217) 4,391 4,000 + 8% 3,000 (-90) 1,943 2,0
Slide 7: Bookings (Amount of contracts concluded)
Bookings (Amount of contracts concluded) (in million Yen) (unaudited) 10,000 9,027 + 18% 9,000 3Q2005 8,000 7,646 6,972 + 42% 3Q2006 7,000 6,000 + 12% 5,000 4,893 4,742 4,250 4,000 3,000 2,383 + 13% 2,114 2,000 - 1% 1,000 623 618 0 Japan US Europe Asia Pacific Latin America (Non-GAAP) * “Bookings” m
Slide 8: % share by region
% share by region (unaudited) 3Q2005 3Q2006 17,975 million Yen 21,002 million Yen Latin Latin America America Asia 3% Asia 3% Pacific Pacific 11% 10% Japan Japan Europe 39% Europe 38% 24% 25% US 23% US 24% (In accordance with US GAAP) Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 8
Slide 9: Revenue recognition of Virus Buster 2007
Revenue recognition of Virus Buster 2007 z Due to the price increase of renewal contracts, total amounts of new contracts of Virus Buster 2007 should be recognized “Deferred Revenue “(deferral rate 100%) z Recognize the quite same amounts into monthly revenue among 12 months z Total 1-year revenue i
Slide 10: Q3 Highlights
Q3 Highlights z Continue to take market share in North America z Japan business growth better than expected z Strong launch of IGSA appliance Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 10
Slide 11: Q3 Lowlights
Q3 Lowlights z EMEA and APAC performance continues to disappoint z SOX compliance requiring more resources than planned. Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 11
Slide 12: New threats - Botnets
New threats - Botnets z Botnets: The #1 emerging Internet threat z Estimated 7% of all computers on the internet are zombies (75-100 million machines) Responsible for over 90% of all spam Generate click fraud in excess of $1 billion annually Phishing to commit identity theft Identity theft los
Slide 13: What is Botnets?
What is Botnets? Botnet — programs that operate as an agent for a user or another program - Infection route - Oblivious infection from security hole or network sharing. - Descriptions - Infected computers are getting controlable via internet by outsiders Hard to aware its infection for few symptoms
Slide 14: InterCloud Security Service (ICSS): An Agent-less Solution to botnets
InterCloud Security Service (ICSS) An Agent-less Solution to botnets No End Point Software Required Housecall Remediation Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 14
Slide 15: Cisco relationship – Q3/Q4
Cisco relationship – Q3/Q4 Q3 highlights z Cisco Channel Recruitment Two Pan-European Distributors signed Three new Cisco VARs signed in North America Potential funnel pipeline for up selling Trend products already in excess of $1M z Revenue starting to trickle in – run-rate of over 1000 units
Slide 16: MS Onecare in the US market
MS Onecare in the US market 75.5% 58.7% 13.1% 9.6% 8.1% 6.3% 7.6% •Microsoft got 13.1% of share •Trend Market share has remained almost the same since Onecare launch •MS’s challenge (3 license & lower price) might reduce retail value Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 16
Slide 17: Sales by Segment
Sales by Segment (unaudited) (in million Yen) 3Q2005 3Q2006 20,000 Large Enterprise 32% 30% 6,302 16,000 5,680 Small & Medium 47% 48% 12,000 21% 22% 10,032 Consumer 8,000 8,412 Total 100% 100% 4,000 4,668 * 3Q2005 shown above is just for reference purposes 3,882 to compare with this year. 0 3Q2005 3
Slide 18: Cost of sales & Operating expenses
Cost of sales & Operating expenses (excluding stock option expenses effects) (in million Yen) (unaudited) 16,000 Cost of sales (old) Amortization of capitalized software, and Material Maintenance Support 14,000 Sales, Marketing R&D 1,065 ADM 903 12,000 768 893 920 688 564 712 640 1,861 1,904 10,000
Slide 19: Headcount
Headcount Jun - 2006 Sep - 2006 3,061 3,204 ADM, ADM, Business Process Business Process Sales, Sales, 481 Marketing 482 Marketing 884 + 143 955 Technical (+ 5%) Technical Support Support Research, Research, 859 Development 916 Development 837 851 Copyright © 2006 Trend Micro Incorporated. All Rights
Slide 20: Non-operating Items
Non-operating Items (unaudited) Other income Interest expense Gain on sales of marketable securities 27 M 3M Exchange gain 160 M Interest income 161 M 449 M Income before taxes Operating income 6,904M 6,111 M (In accordance with US GAAP) Copyright © 2006 Trend Micro Incorporated. All Rights Reserved
Slide 21: Deferred Revenue
Deferred Revenue (unaudited) (in million Yen) 45,000 40,000 42,447 39,706 35,000 37,912 35,381 30,000 31,250 25,000 20,000 15,000 10,000 5,000 0 Sep-'05 Dec-'05 Mar-'06 Jun-'06 Sep-'06 * Total of current and long term (In accordance with US GAAP) Copyright © 2006 Trend Micro Incorporated. All Rights
Slide 22: Deferred Revenue by Region
Deferred Revenue by Region (unaudited) (in million Yen) 18,000 16,638 + 6% * Total of current and long term 16,000 15,680 14,000 Jun-06 + 20% 12,058 Sep-06 12,000 10,055 - 4% 10,000 9,613 9,216 8,000 6,000 + 7% 4,000 3,063 3,268 - 2% 2,000 1,295 1,267 0 Japan US Europe Asia Pacific Latin America (In
Slide 23: Deferred Revenue by Region (constant currency)
Deferred Revenue by Region If currency exchange rates used as of the end of 2Q2006 were used as of the end of 3Q2006: (unaudited) (in million Yen) * ( ) : difference from GAAP base 18,000 16,638 + 6% 16,000 (0) * Total of current and long term 15,680 14,000 Jun-06 12,000 11,787 + 17% (-271) Sep-06 1
Slide 24: Balance Sheet
Balance Sheet (unaudited) (in million Yen) Jun-2006 change Sep-2006 Assets Cash & cash equivalents 71,118 - 4,268 66,850 Account receivable (less allowance for doubtful accounts 15,827 - 48 15,779 and sales returns) Marketable securities & Securities investments 35,036 + 4,174 39,210 Liabilities Def
Slide 25: Q4 forecast assumptions
Q4 forecast assumptions z North America to lead growth, Japan at company average, EMEA single digit growth z Booking growth rate may be lower than billing due to large deferrals booked in Q3 z Stock option expenses will be about 1.21Bn yen z Estimated exchange rate: 1USD = 117yen 1EUR = 148yen Copyr
Slide 26: Projection for 4Q2006
Projection for 4Q2006 (unaudited) For 4Q2006 Expected (in million Yen) Oct - Dec, 2006 YoY growth Net Sales 22,800 11% Operating Income 7,100 - 11% Net Income 3,800 - 34% • Including stock option expense about 1,215M Yen (In accordance with US GAAP) If stock option expenses are not included Net Sale
Slide 27: Thank you!
Thank you! Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 27
Slide 28: Appendix: Quarterly Chart (1)
Appendix Quarterly Chart (1) (in million Yen) (unaudited) FY2005 FY2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q sales 17,301 17,189 17,975 20,565 20,594 20,079 21,002 Cost of sales 2,410 2,667 2,739 3,312 3,679 3,826 3,886 Operating expenses 7,590 9,052 8,374 9,314 8,569 10,881 11,005 Operating incom e 7,301 5,470 6,8
Slide 29: Appendix: Quarterly Chart (2)
Appendix Quarterly Chart (2) (in million Yen) (unaudited) FY2005 FY2006 Sales by region 1Q 2Q 3Q 4Q 1Q 2Q 3Q Japan 7,366 6,882 6,942 8,226 8,237 7,835 8,068 US 3,401 3,484 4,182 4,350 4,720 4,116 4,970 Europe 4,314 4,515 4,391 5,160 4,830 5,191 5,139 Asia Pacific 1,748 2,017 1,943 2,201 2,166 2,270