Lenovo Group Limited · HKEX:992
Lenovo — Q3 2022 Earnings Presentation
33 slides from Lenovo's earnings presentation, Feb 23, 2022
Slide 1: 3QFY22 Earnings Announcement
3QFY22 Earnings Announcement Feb 23, 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 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
Slide 3: Yuanqing Yang, Chairman & CEO
Yuanqing Yang Chairman & CEO Feb 23, 2022 2022 Lenovo Internal. All rights reserved.
Slide 4: Sustainable Profitability Increases
Sustainable Profitability Increases OPPORTUNITIES PERFORMANCE SUSTAINABLE GROWTH 2022 Lenovo Internal. All rights reserved. 4
Slide 5: Group: Record Results amid Digital & Intelligent transformations
Group: OPPORTUNITIES Record Results amid Significant Opportunities from Digital & Intelligent Digital/Intelligent transformations: transformations • Investments in digital transformation will increase 16.5% annually over next 3 years Client Edge-Cloud- Intelligence Network • New IT architecture of C
Slide 6: Group: Record Results amid Digital & Intelligent transformations
PERFORMANCE Group: Group Net Income ($M) Group Revenue ($M) Record Results amid +17% Digital & Intelligent +62% 17,245 20,127 transformations 16.1% 600 9.6% 640 1.2 • All-time record Net Income of 500 1 395 400 0.8 $640 million, up 62% YTY 300 0.6 • Net Income margin, up 0.9 pts 200 0.4 100 0.2 YTY,
Slide 7: Group: Record Results amid Digital & Intelligent transformations
Group: SUSTAINABLE GROWTH Record Results amid Digital & Intelligent ⚫ Double investment in R&D along transformations Client-Edge-Cloud-Network- Intelligence architecture ⚫ Enhance digital foundation to support business growth ⚫ Compete as One Lenovo with pocket-to-cloud offerings, global footprint a
Slide 8: SSG: Higher margin, strong growth
SSG OPPORTUNITIES Solutions & Services Group: New IT Reshaping the Industry Higher margin, • Digital and cloud services each strong growth expected to reach 20% of the trillion- dollar global IT services by 2025 • 47% of workforce working-from-home driving demand for customized services • as-a-Servi
Slide 9: SSG: Higher margin, strong growth
SSG PERFORMANCE Solutions & Services Group: SSG Operating Profit ($M) & Margin (%) SSG Revenue ($M) Higher margin, 300 +44% 332 0.3 1,195 +25% 1,498 strong growth 230 0.25 200 0.2 22.2% 19.3% 0.15 100 0.1 • Operating margin 22%, operating 0.05 profit up 44% YTY 0 Q3 20/21 Q4 20/21 Q1 21/22 Q2 21/22
Slide 10: SSG: Higher margin, strong growth
SSG SUSTAINABLE GROWTH Solutions & Services Group: Higher margin, • Capture opportunities in remote work trend strong growth • Leverage the global service footprint to provide accessibility/flexibility to customers • Invest in TruScale as-a-Service and hybrid cloud solutions with own IP • Expand sus
Slide 11: ISG: Profitable with strong premium-to-market growth
ISG OPPORTUNITIES Infrastructure Solutions Group: Profitable with strong ICT Infrastructure upgrade continues, a $250 billion market through 2025 premium-to-market • Edge infrastructure exceed $41 billion growth with hypergrowth Lenovo’s strategic intent: Build capabilities for sustainable profitabl
Slide 12: ISG: Profitable with strong premium-to-market growth
ISG PERFORMANCE Infrastructure Solutions Group: ISG Operating Results ($M) & Margin(%) Profitable with strong 20 +$28M 17 0.015 premium-to-market 0.01 10 0.9% 0.005 0 growth -10 -20 -11 0 -0.005 -0.01 -30 -0.7% • Milestone : Turned profitable for the -0.015 -40 -0.02 Q3 20/21 Q4 20/21 Q1 21/22 Q2 21
Slide 13: ISG: Profitable with strong premium-to-market growth
ISG SUSTAINABLE GROWTH Infrastructure Solutions Group: Profitable with strong • Leverage full customer segment premium-to-market coverage to balance scale & growth profitability • Optimize security/reliability and agility/flexibility through hybrid infrastructure solutions • Invest to expand in Edge
Slide 14: IDG: Strong Growth, Stronger Profitability
OPPORTUNITIES IDG Intelligent Devices Group: • PC: Remain strong and stable, shifting Strong Growth, to commercial/premium Stronger Profitability • Smartphone: Leverage market reshuffling • Emerging Smart Devices: Growth potential in IoT(Embedded Computing), AR/VR (Metaverse), Smart Home, Smart Coll
Slide 15: IDG: Strong Growth, Stronger Profitability
IDG Intelligent Devices Group: PERFORMANCE Strong Growth, IDG Operating Profit ($M) & Margin(%) +21% Stronger Profitability 1600 1400 1,352 10.0% 9.5% 1200 1,120 9.0% 1000 15% 8.5% 800 8.0% 600 7.5% 400 7.7% 7.0% 7.4% • Record Operating profit, up 21% 200 6.5% 0 6.0% Q3 20/21 Q4 20/21 Q1 21/22 Q2 21
Slide 16: IDG: Smartphone Revenue and Operating Profit
IDG Intelligent Devices Group: PERFORMANCE Strong Growth, Smartphone Revenue($M) +46% 2,217 Smartphone Operating Profit ($M) Stronger Profitability 1,522 100 90 +37% 89 1 0.99 0.98 0.97 0.96 0.95 0.94 0.93 0.92 0.91 0.9 0.89 0.88 0.87 0.86 0.85 0.84 0.83 0.82 80 0.81 0.8 0.79 0.78 0.77 0.76 0.75 0.7
Slide 17: IDG: Strong Growth, Stronger Profitability
IDG SUSTAINABLE GROWTH Intelligent Devices Group: Strong Growth, • PC：Invest in innovation, premium Stronger Profitability segments and core components • Mobile: Strengthen product portfolio and marketing, expand in Europe/Asia Pacific markets • Capture the emerging opportunities in IoT(Embedded Com
Slide 18: Sustainable Profitability Increase & Growth
Sustainable Profitability Increase & Growth Expanding Capabilities Strategy Execution Market Coverage Developing Paying Off Grasp the opportunities Efficiency, Innovation Drive the service-led of New IT intelligent transformation 2022 Lenovo Internal. All rights reserved. 18
Slide 19: Wong Wai Ming, Chief Financial Officer
Wong Wai Ming Chief Financial Officer Feb 23, 2022 2022 Lenovo Internal. All rights reserved.
Slide 20: On Pace to Double Net Margin
PERFORMANCE On Pace to Double US$ Revenue Net Margin Million +17% YTY 20,127 Revenue Contribution & Growth by Geo 17,245 16,929 17,869 15,630 • Record performance with revenue EMEA, 27%, PRC, 27%, exceeding $20 billion; robust strength +20%YTY +23% YTY Q3 Q4 Q1 Q2 Q3 across geographical markets 20/2
Slide 21: Double-Down on R&D to Drive Sustainable Growth
PERFORMANCE Double-Down on R&D to Drive US$ Million +9% R&D Spending +38% Sustainable Growth +5% 1,454 482 549 1,336 398 • Boosted R&D spending by 38% YTY 1,266 to facilitate “Client-Edge-Cloud- Network-Intelligence” architecture 18/19 19/20 20/21 Q3 20/21 Q2 21/22 Q3 21/22 • Global R&D resource by
Slide 22: Cash and Working Capital
PERFORMANCE Cash and Working Operating Cashflow Capital US$ Million 3,653 3,051 2,210 2,615 • Net cash generated from operating 1,473 activities was US$606 million • Higher working capital required to 18/19 19/20 20/21 YTD 20/21 YTD 21/22 build strategic component inventory Inventory Account Receiva
Slide 23: SSG
SSG PERFORMANCE Solutions & Services Group US$ Million Revenue +25% 1,800 YTY 1,600 1,498 • Strong revenue growth of 25% YTY to $1.5bn; 1,400 1,363 1,195 1,184 Booking and deferred revenue up 25-26% YTY 1,200 1,088 1,000 • Service opportunities driven by New IT trend, hybrid 800 work model, commerci
Slide 24: ISG
PERFORMANCE ISG Infrastructure Solutions Group US$ Million Revenue +19% YTY 2,500 1,968 • Achieved profitability for first time since acquisition; 2,000 1,622 1,602 1,835 1,929 Operating profit up $28 million YTY; Revenue grew 1,500 19% YTY 1,000 • Demand empowered by a strong infrastructure 500 upg
Slide 25: IDG
IDG PERFORMANCE Intelligent Devices Group* US$ Million Revenue +16% YTY 20,000 17,610 • All-time high revenue and operating profit; 15,210 14,666 15,339 15,000 13,630 Record operating margin 10,000 • Sector leadership benefitting from commercial recovery and demand strength in premium 5,000 products
Slide 26: ESG - A Smarter Future for All
ESG - A Smarter Future for All ✓ Recognized at Leadership Level by CDP for climate change and water security Recent Recognitions ✓ Exploring path to Net-Zero emissions by 2050 Environmental • Completed road-test of SBTi’s Net-Zero methodology; conducting internal sizing • Founding member of China Ne
Slide 27: Outlook
Outlook Group Mission is to lead and enable Intelligent Transformation Enable net income margin improvement in medium term; Drive R&D to turbocharge innovation; Increase brand premium SSG: Leverage powerful Group platform for high-margin service opportunities • Extensive exposure to commercial PC an
Slide 28: Supplemental Financial Materials
Supplemental Financial Materials - Financial Summary - Condensed Consolidated Income Statement - Condensed Consolidated Balance Sheet - Condensed Consolidated Cash Flow Statement 2022 Lenovo Internal. All rights reserved. 28
Slide 29: Financial Summary
Financial Summary US$ Million Q3 21/22 Q3 20/21 Y/Y% Revenue 20,127 17,245 16.7% Gross profit 3,355 2,786 20.4% Operating expense (2,423) (2,085) 16.2% Operating profit 932 701 33.0% Other non-operating expenses (77) (110) (29.4%) Pre-tax income 855 591 44.6% Taxation (173) (160) 8.4% Profit for the
Slide 30: Condensed Consolidated Income Statement
Condensed Consolidated Income Statement US$ Million Q3 21/22 Q3 20/21 Revenue 20,127 17,245 Cost of sales (16,772) (14,459) Gross profit 3,355 2,786 Selling and distribution expenses (1,012) (863) Administrative expenses (730) (859) Research and development expenses (549) (398) Other operating expen
Slide 31: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet US$ Million As at Dec 31, 2021 As at Sep 30, 2021 Non-current assets 15,164 15,003 Property, plant and equipment 1,583 1,556 Intangible assets 8,138 8,239 Others 5,443 5,208 Current assets 30,483 27,572 Bank deposits and cash 3,829 3,731 Trade, notes and other re
Slide 32: Condensed Consolidated Cash Flow Statement
Condensed Consolidated Cash Flow Statement US$ Million Q3 21/22 Q3 20/21 Q2 21/22 Net cash generated from operating activities 606 1,963 1,561 Net cash used in investing activities (389) (197) (343) Net cash used in financing activities (110) (1,525) (717) Increase in cash and cash equivalents 107 2
Slide 33: thanks.
thanks. Smarter technology for all Lenovo