Lenovo Group Limited · HKEX:992
Lenovo — Q1 2024 Earnings Presentation
29 slides from Lenovo's earnings presentation, Aug 17, 2023
Slide 1: Q1FY24 Earnings Announcement
Q1FY24 Earnings Announcement Aug 17, 2023 2023 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 17, 2023 2023 Lenovo Internal. All rights reserved.
Slide 4: Group Performance
Group: Performance Rise to the Challenges & Persist in Transformation • Macro environment and industry still PC & Non-PC challenging Revenue Mix (%) • Revenue $12.9B, net income $191M (non- HKFRS) • Service-led business strong growth and high profitability • Solid progress of diversified growth engi
Slide 5: Group: Opportunities & Sustainable Growth
Group: Opportunities & Sustainable growth Rise to the Challenges & Persist in Transformation ⚫ Cautiously optimistic over next few quarters ⚫ Client device market recovering ⚫ Component price bottoming ⚫ With cost saving plan, keeping E/R ratio resilient and profitability healthy ⚫ Digital & intelli
Slide 6: SSG Performance
SSG Performance Solutions & Services Group: High Margin, Strong Growth • Continuously delivered strong revenue growth and high profitability • Support Services business profitability improved with stable revenue • Managed Services, Project & Solution Services grew faster, accounting for 51% of SSG r
Slide 7: SSG Opportunities & Sustainable Growth
SSG Opportunities & Sustainable growth Solutions & Services Group: High Margin, Strong Growth Through 2026: • Double-digit CAGR in IT services • Fast growth in vertical solutions of smart city, smart manufacturing, smart education, smart retail, etc. Drive high profitability and strong growth in fas
Slide 8: ISG Performance
ISG Performance Infrastructure Solutions Group: Delivering Growth in Key Areas • Server: revenue & profitability down due to market pressure • Storage: revenue +120% YTY, now global #4 • Software: revenue +50% YTY • Services: revenue +11% YTY • HPC*: revenue +45% YTY • A.I. hardware infrastructure:
Slide 9: ISG Opportunities & Sustainable Growth
ISG Opportunities & Sustainable growth Infrastructure Solutions Group: Delivering Growth in Key Areas • AIGC* breakthrough driving ICT infrastructure upgrade acceleration • Invest in A.I. infrastructure innovations • Drive competitive differentiation to resume premium to market growth and sustainabl
Slide 10: IDG Performance
IDG Performance Intelligent Devices Group: Maintaining leadership • Revenue & profitability impacted by device market decline • PC: maintained global #1, market share 23.2%, inventory back to healthy level • Mobile: record Q1 activation in 10 years, improved channel inventory, new products strengthe
Slide 11: IDG Opportunities & Sustainable Growth
IDG Opportunities & Sustainable growth Intelligent Devices Group: Maintaining leadership • Hybrid work model continues • AIGC* driving adoption of intelligent technologies • Invest in innovations, build the next generation A.I. devices • Execute three-year growth plan for smartphone business • Enric
Slide 12: Anchor Technologies: Computing & A.I.
Anchor Technologies: Computing & A.I. Client Computing Data Edge Computing Computing Power Cloud Computing Computing A.I. Computing Algorithm Solutions & Services 2023 Lenovo Internal. All rights reserved. 12
Slide 13: Control Expenses & Mitigate Risks; Drive Innovation & Intelligent Transformation
Control Expenses & Mitigate Risks Drive Innovation & Intelligent Transformation 2023 Lenovo Internal. All rights reserved. 13
Slide 14: Wong Wai Ming, Chief Financial Officer
Wong Wai Ming Chief Financial Officer Aug 17, 2023 2023 Lenovo Internal. All rights reserved. *all figures in the following slides are in million US$ unless otherwise stated
Slide 15: Positioning for Recovery
Positioning for Performance Recovery Revenue Gross Profit Margin 17.5% • Service-led Transformation continued 20,000 17.6% 16,956 17,090 20,000 17.4% 15,267 20,000 with SSG revenue up 18% YTY and non- 19,999 16.9% 17.1% 17.2% 12,635 12,900 19,999 17.0% PC1 sales up to 41% of business group 19,999 16
Slide 16: Strong Working Capital Management
Strong Working Performance Capital Management Cash and Borrowings 1,085 Net Cash 6,000 5,567 5,019 • Maintained net cash position at 5,000 3,788 4,250 4,355 4,000 581 $454mn with cash levels at $4.4bn, up 3,000 366 454 394 $567mn YTY, enhancing business 2,000 1,000 agility - Q1 22/23 Q2 22/23 Q3 22/
Slide 17: SSG Performance
SSG Performance Solutions & Services Group Revenue 2,500 • Record 1Q revenue, up 18% YTY 2,000 1,456 1,721 1,836 1,650 1,713 1,500 • Operating profit margin of 21% 1,000 demonstrated resilience and robust 500 - profitability Q1 Q2 Q3 Q4 Q1 22/23 22/23 22/23 22/23 23/24 • Managed Services capitalized
Slide 18: ISG Performance
ISG Performance Infrastructure Solutions Group Revenue • Strong growth in multiple products offset 3,000 2,500 2,614 2,855 2,200 2,086 by sluggish infrastructure sector demand 2,000 1,914 1,500 and slow platform transition. Revenue 1,000 declined by 8% YTY and segment loss 500 - reached $60mn Q1 22/
Slide 19: IDG Performance
IDG Performance Intelligent Devices Group1 Revenue 14,274 13,716 15,000 11,586 • Revenue fell 28% YTY with operating 10,000 9,796 10,261 margin down to 6.3% amid pricing 5,000 pressure due to inventory clearance - Q1 22/23 Q2 22/23 Q3 22/23 Q4 22/23 Q1 23/24 • The magnitude of IDG’s shipment decline
Slide 20: Continued R&D Investment to Drive Innovation
Performance Continued R&D Investment to Drive R&D Expenses and Ratio to Revenue Innovation 1,500 1,300 3.0% 3.3% 3.8% 4.3% 3.5% 5.0% 4.0% 1,100 3.0% 900 • R&D expense to revenue ratio 700 556 579 2.0% 511 550 1.0% increased to 3.5% in 1Q, from 3.0% a 500 451 0.0% year ago 300 100 -1.0% • Strategic i
Slide 21: ESG Updates
ESG Updates #1 1st PC and smartphone maker >3x on Green500 list of most power- solar energy generation from FY efficient supercomputers in world1 to have an SBTi2 validated Net 2018/193 Environmental for a second time in June 2023 Zero target by 2050 4th year 10x Top Score included in the Bloomberg
Slide 22: Outlook
Outlook Group Mission is to Lead and Enable Intelligent Transformation Improve net income margin in the medium-term; Turbocharge innovation; Increase brand premium; Mitigate short-term challenges amid macro uncertainties; Leverage Digital Transformation to drive secular growth SSG: Serve as a New Gr
Slide 23: Supplemental Financial Materials
Supplemental Financial Materials - Financial Summary - Condensed Consolidated Income Statement - Condensed Consolidated Balance Sheet - Condensed Consolidated Cash Flow Statement - Supplemental Non-HKFRS Measures 2023 Lenovo Internal. All rights reserved. 23
Slide 24: Financial Summary
Financial Summary US$ Million Q1 22/23 Q1 23/24 Y/Y% Revenue 16,956 12,900 -24% Gross profit 2,869 2,252 -22% Operating expenses (2,092) (1,862) -11% Operating profit 777 390 -50% Operating profit (non-HKFRS) 813 402 -51% Other non-operating income/(expenses), net (86) (162) 87% Profit before taxati
Slide 25: Condensed Consolidated Income Statement
Condensed Consolidated Income Statement US$ Million Q1 22/23 Q1 23/24 Revenue 16,956 12,900 Cost of sales (14,087) (10,648) Gross profit 2,869 2,252 Selling and distribution expenses (879) (799) Administrative expenses (686) (597) Research and development expenses (511) (451) Other operating income/
Slide 26: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet US$ Million As of Jun 30, 2022 As of Jun 30, 2023 Current assets 29,105 22,274 Bank deposits and cash 3,846 4,423 Trade, notes and other receivables 15,917 11,478 Inventories 8,868 5,907 Others 474 466 Non-current assets 15,143 15,650 Property, plant and equipmen
Slide 27: Condensed Consolidated Cash Flow Statement
Condensed Consolidated Cash Flow Statement US$ Million Q1 22/23 Q1 23/24 Net cash generated from operating activities 399 650 Net cash used in investing activities (388) (200) Net cash used in financing activities (8) (283) Increase in cash and cash equivalents 2 167 Effect of foreign exchange rate
Slide 28: Supplemental Non-HKFRS Measures
Supplemental Non-HKFRS Measures US$ Million Q1 22/23 Q1 23/24 Profit Profit Profit Profit Operating Profit before for the attributable Operating Profit before for the attributable profit taxation period to equity profit taxation period to equity holders holders As reported 777 691 539 516 390 228 18
Slide 29: Smarter technology thanks. Lenovo
Smarter technology thanks. Lenovo