Trend Micro Incorporated · TSE:4704

Trend Micro — Q1 2017 Earnings Presentation

32 slides from Trend Micro's earnings presentation, May 9, 2017

  1. Slide 1: Trend Micro FY2017.1Q Results

    Trend Micro FY2017.1Q Results Mahendra Negi CFO, Representative Director May 9, 2017

  2. 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

  3. Slide 3: FY2017 1Q Financial Highlight

    FY2017. 1Q Financial Highlight （First quarter ended March 31, 2017） 3 Copyright © 2017 Trend Micro Incorporated. All rights reserved. 3

  4. Slide 4: FY2016 quarterly numbers reflecting purchase price allocation

    FY16 Each Quarterly number reflecting the finalization of Purchase Price Allocation (TippingPoint acquisiton) at the end of FY16 (*FY16 Annual numbers Not changed) (unaudited) We use each quarterly number in below table for the last year comparison in FY2017 (in million Yen) FY2016 Q1 FY2016 Q2 FY20

  5. Slide 5: Q1 Consolidated Results

    Q1 Consolidated Results (in million Yen) Three months YoY ended Mar 31, 1Q2016 1Q2017 growth Net sales 30,326 35,250 + 16% Total Operating expenses 21,612 26,530 + 23% Operating income (Margin) 8,713 （ 29%） 8,720 （25%） + 0% Ordinary income 8,689 7,833 - 10% Net income 6,302 5,430 - 14% attributable

  6. Slide 6: Progress (3 months)

    Progress （3 months） (in million Yen) Revenue Operating Income 160,000 (Forecast) 147,300 40,000 37,500 (Forecast) 140,000 35,000 34,360 131,936 120,000 30,000 100,000 25,000 25,538 94,988 (Progress of Forecast: 23%) 80,000 20,000 (Progress of Forecast: 24%) 62,667 15,987 60,000 15,000 35,250 40,000

  7. Slide 7: Q1 USD based Results (Non-GAAP)

    Q1 USD based Results (Non-GAAP) (unaudited) Three months (in thousand USD) ended Mar 31, 1Q2016 1Q2017 YoY change Net sales 262,954 310,335 + 18% Cost of sales 43,747 66,054 + 51% Operating expenses 143,651 167,505 + 17% Operating income 75,555 76,775 + 2% Ordinary income 75,346 68,964 - 8% Net Inco

  8. Slide 8: Net Sales Growth by Region

    (in million Yen) Net Sales Growth by Region (unaudited) 16,000 14,466 + 8% 14,000 13,360 1Q2016 + 41% 1Q2017 12,000 9,702 + 6% 10,000 8,000 6,899 6,000 5,532 5,885 + 10% 3,793 4,163 4,000 + 39% 2,000 7401,032 0 Japan North America Europe APAC, Middle Latin America East and Africa

  9. Slide 9: Net Sales Growth by Region (constant currency)

    Net Sales Growth by Region (in million Yen) If currency exchange rates used for 1Q2016 were used for 1Q2017: (unaudited) 16,000 14,466 + (0) 8% * ( ) : difference from GAAP base 1Q2016 14,000 13,360 + 43% 1Q2017 (+138) 12,000 9,841 + 12% 10,000 (+294) + 8% 8,000 6,899 (- 68) 6,180 6,000 5,532 + 35%

  10. Slide 10: Decomposition of Revenue (vs. last year)

    Decomposition of Revenue (vs. last year） Latin America (unaudited) APAC, MEA Exchange impact Europe + 300M + 260M - 333M Japan + 647M North America + 1,106M 2017Ｑ1 + 2,942M Net sales 2016Ｑ1 Net 35,250M sales 30,326M (Non-GAAP)

  11. Slide 11: Constant currency revenue growth

    -5% 0% 5% 10% 15% 20% 25% 2007Q1 (YoY) same period 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016

  12. Slide 12: Sales by Segment

    (in million Yen) Sales by Segment (unaudited) 16,000 Growth rate (YoY) 14,000 + 1% Consumer - 3% 12,000 All Enterprise + 25% 6,654 10,000 1,663 - 14% 8,000 -17% 6,000 231 + 15% + 62% -9% 4,000 8,039 769 7,812 5,654 +8% - 52% 2,000 3,393 +15% 4 0 1,027 + 41% Japan North America Europe APAC, Middle Ea

  13. Slide 13: Hybrid Infrastructure protection & User protection Gross sales

    “Hybrid Infrastructure protection” & “User protection” (in million Yen) Gross sales (unaudited) + 1% YoY Hybrid Infrastructure protection User protection (Last year currency base) 17,953 18,000 18,000 16,481 16,348 16,518 16,000 15,207 16,000 13,894 14,000 14,000 + 116% YoY (Last year currency base)

  14. Slide 14: % share by region

    % share by region 1Q2016 1Q2017 30,326 million Yen 35,250 million Yen Latin Latin America America APAC,MEA 3% APAC,MEA 2% 12% 13% Europe Japan Europe Japan 18% 44% 17% 41% North North America America 23% 28%

  15. Slide 15: Pre-GAAP (Revenue before adjusting Deferred revenue)

    “For reference” Pre-GAAP (Revenue before adjusting Deferred revenue) (in million Yen) (unaudited) 16,411 + 10% 1Q2016 14,853 1Q2017 + 55% 10,521 - 4% 6,797 + 3% 4,970 4,796 4,184 4,307 + 42% 958 673 Japan North America Europe APAC, Middle East Latin America and Africa “Notice” (Non-GAAP) Pre-GAAP me

  16. Slide 16: Pre-GAAP at constant currency

    “For reference” Pre-GAAP (Revenue before adjusting Deferred revenue) (in million Yen) If currency exchange rates used for 1Q2016 were used for 1Q2017: (unaudited) 16,411 + 10% 1Q2016 14,853 + 57% 1Q2017 10,650 + 1% + 1% 6,797 4,970 5,023 4,184 4,239 + 39% 673 934 Japan North America Europe APAC, Mid

  17. Slide 17: Net sales & Pre-GAAP growth trend

    Net sales & Pre-GAAP growth trend (unaudited) (on a constant currency basis) (Non-GAAP) 30% 27% 26% Net Sales 25% Pre-GAAP 20% 17% 18% 15% 10% 5% 3% 0% Total Enterprise Consumer -5% -3% 17

  18. Slide 18: Deferred Revenue

    (in million Yen) Deferred Revenue (unaudited) 120 ,00 0 * Total of current and long term 111,465 110 ,00 0 110,397 103,476 101,071 101,579 98,108 100,071 97,980 99,245 100 ,00 0 90,000 80,000 70,000 60,000 50,000 Mar-'15 Jun-'15 Sep -'15 Dec-'1 5 Mar-'16 Jun-'16 Sep -'16 Dec-'1 6 Mar-'17

  19. Slide 19: Deferred Revenue by Region

    Deferred Revenue by Region (in million Yen) (unaudited) 70,000 + 3% * Total of current and long term 60,000 56,309 58,185 Dec-16 50,000 Mar-17 40,000 - 1% 30,000 23,434 23,243 - 5% +1% 20,000 16,136 15,354 11,940 12,114 - 0% 10,000 2,575 2,567 0 Japan North America Europe APAC, Middle Latin America

  20. Slide 20: Deferred Revenue by Region (constant currency)

    Deferred Revenue by Region If currency exchange rates used as of the end of 4Q2016 were used as of the end of 1Q2017: (in million Yen) (unaudited) 70,000 + 3% * ( ) : difference from GAAP base (0) 60,000 56,309 58,185 * Total of current and long term Dec-16 50,000 Mar-17 + 4% 40,000 - 3% (+1,030) (+

  21. Slide 21: Cost

    (in million Yen) Cost (unaudited) (Non-GAAP) (Non-GAAP) Stock Options / Acquisition Related Cost s Salary & Benefit 30,000 Office Ov erhead Outside S erv ice 28,000 Adm inistration Selling & Marke ting Goods / S oftw are Amortization & Capitalization 1,673 Goods / Software Amortization & 26,000 Capi

  22. Slide 22: Pre-GAAP vs Total Costs

    Pre-GAAPⅴs Total Costs (in million Yen) (unaudited) Pre-GAAP Total Costs Pre-GAAP Margin 44,000 33% 32% 40,000 31% 32% 31% 36,000 41,273 31% 32,000 36,046 34,195 30% 36,996 28,000 33,156 29% 24,000 31,479 28,126 28% 28% 20,000 28% 27% 22,770 26,530 27% 16,000 25,067 25,862 26% 12,000 21,612 8,000 25

  23. Slide 23: Cash flows

    Cash flows (unaudited) (in million Yen) 1Q2016 1Q2017 YoY growth Cash flows from operating activities 5,175 9,493 + 83% Cash flows from investing activities 2,368 4,576 + 93% Cash flows from financing activities - 13,992 - 17,934 － Effect of exchange rate changes - 1,681 - 968 － on cash and cash equ

  24. Slide 24: Headcount

    Headcount Dec - 2016 Mar - 2017 5,627 5,653 Admin, Admin, Business Process Business Process Technical 851 Sales, Marketing Technical 852 Sales, Marketing Support Support 1,654 1,759 1,090 1,228 Research, Research, Development Development + 26 1,927 1,919 (+ 0%) Latin Latin77 78 Europe Europe 658 667

  25. Slide 25: Non-operating & Extra-ordinary Items

    Non-operating & Extra-ordinary Items (unaudited) Other income Equity in gains of affiliated companies Exchange loss Gain on valuation of derivatives 39M 92M Interest income 158M 280M - 1,439M Other expenses Operating Income - 18M Income before Ordinary Income income taxes 8,720M 7,833M 7,833M (Non-G

  26. Slide 26: Balance Sheet

    Balance Sheet (unaudited) (in million Yen) Dec-2016 change Mar-2017 Assets Cash & cash equivalents 84,509 - 5,837 78,672 Account receivable (less allowance for doubtful accounts) 35,551 - 3,926 31,625 Marketable securities & Securities investments 98,743 + 6,847 105,590 Goodwill 18,356 - 1,773 16,58

  27. Slide 27: Q1 Highlights

    Q1 Highlights • Double digit revenue growth, driven by growth of Hybrid Infrastructure protection • Well balanced growth across all regions 27

  28. Slide 28: Q1 Lowlights

    Q1 Lowlights • Macro environment for consumer business remains challenging • Exchange loss causes decline in ordinary income 28

  29. Slide 29: Projection for FY2017 Annual (Unchanged)

    Projection for FY2017 Annual (Unchanged) (unaudited) For FY2017 Expected (in million Yen) Jan - Dec, 2017 YoY growth Net Sales 147,300 + 12% Operating Income 37,500 + 9% Ordinary Income 37,700 + 7% Net Income 24,600 - 0% attributable to owners of the parent (Estimated annual exchange rate 1USD=110 y

  30. Slide 30: Thank You

    Thank You 30

  31. Slide 31: Appendix: Quarterly Chart (1)

    Appendix (unaudited) Quarterly Chart (1) (in million Yen) FY2016 (Reflecting Purchase Price Allocation) FY2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Ｎｅｔ s ale s 30,326 32,341 32,321 36,947 35,250 Co s t o f s ale s 5,045 5,793 5,386 6,815 7,503 O pe r at in g e x pe n s e s 16,567 19,274 17,383 21,310 19,026 O pe

  32. Slide 32: Appendix: Quarterly Chart (2)

    Appendix (unaudited) Quarterly Chart (2) (in million Yen) FY2016 (Reflecting Purchase Price Allocation) FY2017 （ S ale s by r e g io n ） Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 J apan 13,360 13,356 13,617 15,844 14,466 US 6,899 8,801 9,071 10,081 9,702 Eu r o pe 5,532 5,321 4,979 5,656 5,885 A P A C, Middle Eas t a

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