Lenovo Group Limited · HKEX:992
Lenovo — Q2 2022 Earnings Presentation
33 slides from Lenovo's earnings presentation, Nov 4, 2021
Slide 1: 2QFY22 Earnings Announcement
2QFY22 Earnings Announcement Nov 4, 2021 2021 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 Nov 4, 2021 2021 Lenovo Internal. All rights reserved.
Slide 4: Opportunities, Performance, Sustainable Growth
Sustainable Profitability Increases OPPORTUNITIES PERFORMANCE SUSTAINABLE GROWTH 2021 Lenovo Internal. All rights reserved. 4
Slide 5: Enabling customers' digital & intelligent transformations
Group: OPPORTUNITIES Enabling customers’ New IT architecture of Client-Edge- Digital & Intelligent Cloud-Network-Intelligence transformations Lenovo’s strategic intent & unique advantage: Help customers realize digital & Client Edge-Cloud- Intelligence intelligent transformation through Network exec
Slide 6: Group performance: record net income and revenue
Group: PERFORMANCE Enabling customers’ 600 Group Net Income ($M) +65% 1.2 Digital & Intelligent 500 512 1 transformations 400 310 0.8 300 0.6 • All-time record Net Income of 200 0.4 $512 million, up 65% YTY 100 0.2 • Net Income margin, up 0.7 pts 0 Q2 20/21 Q3 20/21 Q4 20/21 Q1 21/22 Q2 21/22 0 YTY,
Slide 7: Group: sustainable growth
Group: SUSTAINABLE GROWTH Enabling customers’ Digital & Intelligent ⚫ Focus on high margin businesses transformations and segments ⚫ Double investment in R&D over 3 years, develop core technology along New IT architecture ⚫ Improve efficiency, profitability through internal digital/intelligent trans
Slide 8: SSG: Higher margin, strong growth - opportunities
SSG OPPORTUNITIES Solutions & Services Group: Higher margin, New IT Reshaping the Industry • Technology architecture becoming strong growth more complex • Need for more sophisticated IT services Lenovo’s strategic intent: Drive high growth in 3 high margin service segments: • Support services • Mana
Slide 9: SSG performance
SSG PERFORMANCE Solutions & Services Group: SSG Operating Profit ($M) & SSG Revenue ($M) Margin (%) Higher margin, 300 +32% 285 0.3 1049 +30% 1363 strong growth 216 0.25 200 0.2 20.9% 20.6% 0.15 100 0.1 • Operating margin 21%, operating 0.05 profit up 32% YTY 0 Q2 20/21 Q3 20/21 Q4 20/21 Q1 21/22 Q2
Slide 10: SSG sustainable growth
SSG SUSTAINABLE GROWTH Solutions & Services Group: Higher margin, Support Services : strong growth • Improve penetration rates, leverage commercial rebounds to grow Managed Services & as-a-Service: • Invest in platforms, tools & go-to-market capabilities • Enhance the TruScale as-a-Service offerings
Slide 11: ISG: Driving to profitability, outperforming - opportunities
ISG OPPORTUNITIES Infrastructure Solutions Group: Driving to profitability, ICT Infrastructure upgrade continues outperforming and a $250 billion market through 2025 growing market Lenovo’s strategic intent: Build capabilities for profitable growth • From server only to full-stack infrastructure of
Slide 12: ISG performance
ISG PERFORMANCE Infrastructure Solutions Group: ISG Operating Results ($M) & Margin(%) Driving to profitability, 0 0 -5 -0.3% -0.005 outperforming -10 -15 -6 -0.01 growing market -20 -25 -0.015 -2.1% -0.02 -30 +$24M • Record revenue, up 34% YTY -35 -30 Q2 20/21 Q3 20/21 Q4 20/21 Q1 21/22 Q2 21/22 -0
Slide 13: ISG sustainable growth
ISG SUSTAINABLE GROWTH Infrastructure Solutions Group: Driving to profitability, Continue to invest in competitiveness and drive to profitability outperforming • Increase investments in Edge computing, growing market Hybrid cloud solutions, 5G cloud-network • Further enhance in-house design & manufa
Slide 14: IDG: Strong growth, stronger profitability - opportunities
IDG OPPORTUNITIES Intelligent Devices Group: PC: Commercial demand recovering, Strong Growth, Windows 11 expected to increase Stronger demand, TAM remains to be 340-355 Profitability million units for the next few years Smartphone: market reshuffling IoT: Market growth of 11% CAGR through 2025 Lenov
Slide 15: IDG performance
IDG Intelligent Devices Group: PERFORMANCE Strong Growth, IDG Operating Profit ($M) & Margin(%) +34% Stronger 1400 1200 1165 15.0% 13.0% Profitability 1000 800 868 15% 11.0% 9.0% 7.0% 600 6.8% 7.6% 5.0% 400 3.0% • Operating profit up 34% YTY 200 1.0% 0 -1.0% Q2 20/21 Q3 20/21 Q4 20/21 Q1 21/22 Q2 21
Slide 16: IDG performance: PC, smartphone, tablet, accessories
IDG Intelligent Devices Group: PERFORMANCE Strong Growth, Smartphone Revenue($M), Operating Profit ($M) & Margin(%) +27% 1931 Stronger 1519 100 +185% 89 10% Profitability 90 80 70 60 9% 8% 7% 6% 50 5% 40 31 4% 30 4.6% 3% 20 2% • PC: Premium Yoga, Workstations 10 0 2.1% 1% 0% Q2 20/21 Q3 20/21 Q4 20/
Slide 17: IDG sustainable growth
IDG SUSTAINABLE GROWTH Intelligent Devices Group: Strong Growth, • Invest in premium PC segments to Stronger improve Average Selling Price & profitability Profitability • Cross sell adjacent non-PC products(smartphones, tablets, smart meeting collaboration, embedded computing), increase non-PC busin
Slide 18: Invest for the future, continue sustainable profitable growth
Invest for the future, continue sustainable profitable growth Clear Strategy Operational Innovation Strong Execution Excellence Drive the service-led Improve efficiency through Digital Double R&D investment intelligent transformation & Intelligent Transformation in 3 years 2021 Lenovo Internal. All
Slide 19: Wong Wai Ming, Chief Financial Officer
Wong Wai Ming Chief Financial Officer Nov 4, 2021 2021 Lenovo Internal. All rights reserved.
Slide 20: Financial Highlights
Financial Highlights 2Q HIGHLIGHTS US$ Million Revenue 1 11. Group revenue up 23% YTY to a new record of $17.9 +23% billion 20,000 YTY 17,869 17,245 16,929 22. Net income* up 65% YTY to an all-time high of $512 15,630 16,000 million; Operating cashflow doubled YTY to 1.6 billion 14,519 US dollars 12
Slide 21: Double-down on R&D to drive sustainable growth
Double-down on R&D to drive sustainable growth US$ Million R&D Spending 1 2Q HIGHLIGHTS 1 FY20/21 R&D spending reached $1.5 billion; 2QFY22 +15% +57% R&D spending up by 57% YTY; R&D headcount grew 1,454 482 by 51% YTY to support New IT investments 1,336 307 R&D projects include Premium, Gaming, and
Slide 22: Strong Cashflow and Balance Sheet
Strong Cashflow and Balance Sheet 1 2Q HIGHLIGHTS US$ Million Operating Cashflow 1 Strong cashflow generation to support investment for 3,653 1,561 future; Operating cashflow increased by US$790 2,008 million YTY to US$1.6 billion on strong profitability 2,210 2 Net debt reduced by US$1bn+ YTY to US
Slide 23: Solutions and Services Group (SSG)
Solutions and Services Group (SSG) Revenue 1 US$ Million +30% 2Q HIGHLIGHTS 1,600 YTY 1,363 1,400 1,195 1,184 1. 1 Robust growth across all segments 1,200 1,088 1,049 - Support Services: Revenue up 23% YTY; Commercial 1,000 recovery, demand for remote-working, and new service 800 opportunity to boos
Slide 24: Infrastructure Solutions Group (ISG)
Infrastructure Solutions Group (ISG) Revenue 1 US$ Million +34% Q2 HIGHLIGHTS YTY 2,500 1,835 1,968 1 Riding on infrastructure upgrade opportunities to 2,000 1,472 1,623 1,602 grow revenue by 34% to an all-time high; Gaining 1,500 market share in nearly every business segment 1,000 Operating loss re
Slide 25: Intelligent Devices Group (IDG)
Intelligent Devices Group (IDG*) US$ Million 1 IDG Revenue +21% Q2 HIGHLIGHTS 18,000 YTY 15,194 14,666 15,339 15,000 13,630 12,686 Revenue set a new 2QFY22 record with operating 12,000 1 margin reaching all-time high of 7.6% 9,000 6,000 1 Strong demand trajectory for commercial and high 3,000 value-
Slide 26: ESG - A More Sustainable Future for All
ESG - A More Sustainable Future for All ESG: Commitment and innovation as a responsible industry leader ✓ Embracing clean energy and driving climate change mitigation • 90% of global operations electricity from renewable sources1 by FY25/26 • Removing one million tons of greenhouse gas emissions fro
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 2021 Lenovo Internal. All rights reserved. 28
Slide 29: Financial Summary
Financial Summary US$ Million Q2 21/22 Q2 20/21 Y/Y% Revenue 17,869 14,519 23% Gross profit 3,006 2,253 33% Operating expense (2,189) (1,688) 30% Operating profit 817 565 45% Other non-operating expenses (75) (95) (21%) Pre-tax income 742 470 58% Taxation (185) (120) 53% Profit for the period 557 35
Slide 30: Condensed Consolidated Income Statement
Condensed Consolidated Income Statement US$ Million Q2 21/22 Q2 20/21 Revenue 17,869 14,519 Cost of sales (14,863) (12,266) Gross profit 3,006 2,253 Selling and distribution expenses (924) (726) Administrative expenses (700) (643) Research and development expenses (482) (307) Other operating expense
Slide 31: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet US$ Million As at Sep 30, 2021 As at Jun 30, 2021 Non-current assets 15,003 14,951 Property, plant and equipment 1,556 1,562 Intangible assets 8,239 8,448 Others 5,208 4,941 Current assets 27,572 25,510 Bank deposits and cash 3,731 3,259 Trade, notes and other re
Slide 32: Condensed Consolidated Cash Flow Statement
Condensed Consolidated Cash Flow Statement US$ Million Q2 21/22 Q2 20/21 Q1 21/22 Net cash generated from operating activities 1,561 771 448 Net cash used in investing activities (343) (214) (192) Net cash used in financing activities (717) (388) (180) Increase in cash and cash equivalents 501 169 7
Slide 33: thanks.
thanks. Smarter technology for all Lenovo