Slide 1: Trend Micro FY2006 4Q / Annual Results
Trend Micro FY2006. 4Q / Annual Results Mahendra Negi COO / CFO , Representative Director February 21, 2007 TRENDMICRO、AppletTrap、eDoctor、INTERSCAN VIRUSWALL、Trend Virus Control System、VSAPI、ウイルスバスター、eManager、PC-cillin、Interscan eManager、MacroTrap、ISVW、TVCS、InterScan、ウイルスバスター On-Line Scan、 GateLock、
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: FY2006 4Q Financial Highlight
FY2006 4Q Financial Highlight Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 3
Slide 4: Consolidated Results
Consolidated Results Three months (in million Yen) (unaudited) ended Dec 31, 4Q2005 4Q2006 YoY growth Net sales 20,565 23,386 14% Cost of sales 3,312 4,503 36% Operating expenses 9,314 12,178 31% Operating income (Margin) 7,939 (39%) 6,705 (29%) - 16% Income before taxes 8,553 7,881 - 8% Net Income
Slide 5: Relation between Bookings and Net revenue
Relation between “Bookings” and “Net revenue” (unaudited) (in million Yen) Three months ended Dec 31, 4Q2005 4Q2006 YoY growth Bookings 24,517 30,117 + 23% Net Revenue 20,565 23,386 +14% ( Net Revenue / Bookings ) 84% 78% In case of using last year’s ratio 25,263 Copyright © 2006 Trend Micro Incorpo
Slide 6: The change of revenue recognition
The change of revenue recognition Due to applying to SOP 97-2 (Software Revenue Recognition) strictly, changing items are mainly the following. (Japan) ・Renew sales of “Virus Buster” for Consumer ( *This item had been already changed since 2QFY2006) (Start of deferred revenue recognition at “Cash-in
Slide 7: Timing of deferred revenue recognition
Timing of deferred revenue recognition Contract (Model) Cash-in * Actual deferred rate depends on each countries and business substances. A Breakdown of New contract 50 A : perpetual licenses of software products 100% B B : virus pattern updates, unspecified product version updates, telephone and on
Slide 8: Impact of cash flows due to revenue recognition change
Impact of cash flows due to revenue recognition change Comparison of cash flows before and after revenue recognition change in FY2006 (unaudited) Account Before change After change YoY growth Cash flows from operating activities 37,388M 37,388M 81% Cash flows from investing activities - 11,104M - 11
Slide 9: USD based Results (Non-GAAP)
USD based Results (Non-GAAP) (unaudited) Three months (in thousand USD) ended Dec 31, 4Q2005 4Q2006 YoY change Net sales 175,129 198,524 13% Cost of sales 28,207 38,223 36% Operating expenses 79,316 103,380 30% Operating income 67,606 56,921 - 16% Income before taxes 72,833 66,901 - 8% Net Income 49
Slide 10: Net Sales Growth by Region
Net Sales Growth by Region (in million Yen) (unaudited) 10,000 9,024 + 10% 9,000 8,226 4Q2005 8,000 4Q2006 7,000 + 21% 5,754 + 12% 6,000 5,257 5,160 5,000 4,350 4,000 + 15% 3,000 2,535 2,201 2,000 + 30% 1,000 628 816 0 Japan US Europe Asia Pacific Latin America (In accordance with US GAAP) Copyright
Slide 11: Net Sales Growth by Region (constant currency)
Net Sales Growth by Region If currency exchange rates used for 4Q2005 were used for 4Q2006: (unaudited) (in million Yen) * ( ) : difference from GAAP base 10,000 9,024 + 10% 9,000 8,226 (0) 4Q2005 8,000 4Q2006 7,000 + 20% + 2% 6,000 (-16) (-515) 5,241 5,160 5,239 5,000 4,350 4,000 + 12% (-70) 3,000
Slide 12: % share by region
% share by region 4Q2005 4Q2006 (unaudited) 20,565 million Yen 23,386 million Yen Latin Latin Asia America Asia America Pacific 3% Pacific 3% 11% 11% Japan Japan Europe 40% Europe 39% 25% 25% US US 21% 22% (In accordance with US GAAP) Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 1
Slide 13: Sales by Segment
Sales by Segment (unaudited) (in million Yen) 4Q2005 4Q2006 24,000 Large Enterprise 32% 31% 20,000 7,261 6,649 16,000 Small & Medium 41% 46% 12,000 10,653 Consumer 27% 23% 8,463 8,000 4,000 Total 100% 100% 5,454 5,472 0 * 4Q2005 shown above is just for reference purposes 4Q2005 4Q2006 to compare wit
Slide 14: Bookings (Amount of contracts concluded)
Bookings (Amount of contracts concluded) (in million Yen) (unaudited) 10,000 9,636 + 9% + 30% 9,000 8,879 8,969 + 41% 4Q2005 8,000 7,430 4Q2006 7,000 6,907 6,000 5,275 5,000 4,000 + 18% 3,003 3,000 2,539 2,000 + 18% 1,000 917 1,079 0 Japan US Europe Asia Pacific Latin America * “Bookings” means amou
Slide 15: Cost of sales & Operating expenses
Cost of sales & Operating expenses (excluding stock option expenses effects) (in million Yen) (unaudited) Cost of sales (old) ※ Amortization of capitalized software, and Material 18,000 Maintenance Support Sales, Marketing 16,000 R&D Administrative 1,277 14,000 753 903 1,065 12,000 768 893 920 688 2
Slide 16: Bookings vs Total costs
Bookings vs Total costs (in million Yen) (unaudited) 30,000 Bookings Total Costs 30,117 25,000 24,517 22,915 23,742 22,296 20,000 19,527 18,346 17,906 15,000 16,681 14,718 14,891 12,626 12,248 10,000 11,719 11,113 9,999 5,000 0 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 * “Total costs”
Slide 17: Q4 Highlights
Q4 Highlights z Strong growth in US and EMEA z Growth across all segments and regions z Good contribution from new products like appliances and services Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 17
Slide 18: Q4 Lowlights
Q4 Lowlights z Increasing people cost as talent becomes expensive Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 18
Slide 19: Headcount
Headcount Sep - 2006 Dec - 2006 3,204 3,229 ADM, ADM, Business Process Business Process Sales, Sales, 482 Marketing 490 Marketing 955 + 25 943 Technical (+ 1%) Technical Support Support Research, Research, 916 Development 934 Development 851 862 Copyright © 2006 Trend Micro Incorporated. All Rights
Slide 20: Non-operating Items
Non-operating Items (unaudited) Other income Interest expense Exchange loss 8M 71 M Gain on sales of marketable securities 406 M Interest income 230 M 619 M Income before taxes 7,881 M Operating income 6,705 M (In accordance with US GAAP) Copyright © 2006 Trend Micro Incorporated. All Rights Reserve
Slide 21: Balance Sheet
Balance Sheet (unaudited) (in million Yen) Sep-2006 change Dec-2006 Assets Cash & cash equivalents 66,850 + 9,347 76,197 Account receivable (less allowance for doubtful accounts 15,779 + 4,145 19,924 and sales returns) Marketable securities & Securities investments 39,210 + 2,944 42,154 Liabilities
Slide 22: FY2006 Annual Financial Highlight
FY2006 Annual Financial Highlight Fiscal Year ended December 2006 Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 22
Slide 23: Consolidated Results
Consolidated Results Fiscal year (in million Yen) (unaudited) ended Dec 31, FY2005 FY2006 YoY growth Net sales 73,030 85,614 17% Cost of sales 11,128 15,894 43% Operating expenses 34,330 42,644 24% Operating income (Margin) 27,572 (38%) 27,076 (32%) - 2% Income before taxes 29,108 29,556 2% Net Inco
Slide 24: Net Sales Growth by Region
Net Sales Growth by Region (in million Yen) (unaudited) 35,000 33,248 + 13% 30,000 29,416 FY2005 FY2006 25,000 + 15% + 25% 21,150 20,000 19,295 18,379 15,417 15,000 + 16% 10,000 9,149 7,910 + 45% 5,000 1,908 2,771 0 Japan US Europe Asia Pacific Latin America (In accordance with US GAAP) Copyright ©
Slide 25: Net Sales Growth by Region (constant currency)
Net Sales Growth by Region If currency exchange rate used for FY2005 were used for FY2006: (unaudited) (in million Yen) * ( ) – difference from GAAP base 35,000 33,248 + 13% (0) 30,000 29,416 FY2005 FY2006 25,000 + 19% + 8% (-992) (-1,371) 20,000 19,780 18,303 18,379 15,417 15,000 + 10% (-446) 10,00
Slide 26: Bookings (Amount of contracts concluded)
Bookings (Amount of contracts concluded) (in million Yen) (unaudited) 40,000 36,443 + 17% 35,000 FY2005 31,019 FY2006 30,000 + 40% + 22% 25,119 24,276 25,000 20,000 19,979 17,995 15,000 + 16% 10,119 10,000 8,707 + 20% 5,000 2,596 3,113 0 Japan US Europe Asia Pacific Latin America * “Bookings” means
Slide 27: % share by region
% share by region (unaudited) FY2005 FY2006 73,030 million Yen 85,614 million Yen Latin Latin Asia Asia America America Pacific Pacific 3% 3% 11% 11% Japan Japan Europe 40% Europe 39% 25% 25% US US 21% 22% (In accordance with US GAAP) Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 2
Slide 28: Sales by Segment
Sales by Segment (unaudited) (in million Yen) FY2005 FY2006 90,000 80,000 Large Enterprise 31% 29% 24,740 70,000 60,000 22,539 Small & Medium 45% 47% 50,000 40,000 40,300 Consumer 32,973 24% 24% 30,000 20,000 Total 100% 100% 10,000 17,518 20,574 0 FY2005 FY2006 * FY2005 shown above is just for refer
Slide 29: Cost of sales & Operating expenses
Cost of sales & Operating expenses (excluding stock option expenses effects) (unaudited) (in million Yen) FY 2005 FY 2006 60,000 Cost of sales (old) * 6% 7% 4,138 50,000 3,073 Maintenance 4% 6% 2,599 7,816 1,671 Support 15% 14% 40,000 6,858 Sales, Marketing 46% 45% 30,000 25,134 R&D 10% 7% 20,944 20
Slide 30: Non-operating Items
Non-operating Items (unaudited) Others Interest expense Foreign exchange loss 298M 20M 38M Gain on sale of securities 464M Interest income 1,776M Income before taxes Operating income 29,556 M 27,076M (In accordance with US GAAP) Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 30
Slide 31: Asset
Asset (unaudited) Asset composition 100% 45% 46% Cash 75% 50% 54% 50% 26% 25% Securities+Time Deposits 15% 24% 25% Accounts receivable 16% 14% 12% (less allowance for doubtful 14% accounts and sales returns) 15% 14% 17% Other assets 12% 0% Dec 03 Dec 04 Dec 05 Dec 06 (In accordance with US GAAP) Cop
Slide 32: Trend Micro's Cash Dividends policy
Trend Micro’s Cash Dividends policy We are increasing the dividend payout ratio for 2006 dividends to 50%. To maintain a “real” pay-out ratio of 50% 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 33: Cash Dividends for FY2006
Cash Dividends for FY2006 (unaudited) Stock Option Expense Dividends for FY2006 4,971M 50% Total : 11,158 Million Yen 50% X (17,236M + 4,971M) 100% Per share : 84 Yen Net Income (+ 50% YoY) 17,236M FY2005: 56 Yen per share * Subject to the approval at the Ordinary General Meeting of Shareholders sch
Slide 34: Return for Shareholders in FY2006
Return for Shareholders in FY2006 (unaudited) 1. Dividends* : 11,158 Million Yen 2. Buyback (done) : 6,810 Million Yen Total : 17,968 Million Yen （ 104% as Return based on Net Income in 2006） * Subject to the approval at the Ordinary General Meeting of Shareholders scheduled in Buyback late March, 2
Slide 35: Q1 forecast assumptions
Q1 forecast assumptions z US bookings and revenues to grow at above average rate, EMEA and Japan at company average z People related costs to increase around 1Bn yen sequentially z Stock option expenses will be 1.1Bn yen z Estimated exchange rate: 1USD = 118yen 1EUR = 156yen Copyright © 2006 Trend M
Slide 36: Projection for 1Q2007
Projection for 1Q2007 (unaudited) For 1Q2007 Expected (in million Yen) Jan - Mar, 2007 YoY growth Net Sales 23,000 12% Operating Income 5,500 - 34% Net Income 2,850 - 42% • Including stock option expense （about 1,084M Yen） (In accordance with US GAAP) Amount of contracts concluded Bookings 26,000 13
Slide 37: Thank you!
Thank you! Copyright © 2006 Trend Micro Incorporated. All Rights Reserved. 37
Slide 38: Appendix: Quarterly Chart (1)
Appendix Quarterly Chart (1) (in million Yen) (unaudited) FY2005 FY2006 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Ｎｅｔ sales 17,301 17,189 17,975 20,565 20,594 20,631 21,002 23,386 Cost of sales 2,410 2,667 2,739 3,312 3,679 3,826 3,886 4,503 Operating expenses 7,590 9,052 8,374 9,314 8,569 10,892 11,005 12,178 Operat
Slide 39: Appendix: Quarterly Chart (2)
Appendix Quarterly Chart (2) (in million Yen) (unaudited) FY2005 FY2006 （ Sales by region） 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Japan 7,366 6,882 6,942 8,226 8,237 7,918 8,068 9,024 US 3,401 3,484 4,182 4,350 4,720 4,349 4,970 5,257 Europe 4,314 4,515 4,391 5,160 4,830 5,427 5,139 5,754 Asia Pacific 1,748 2,017