Trend Micro FY2014.3Q Results Mahendra Negi CFO, Representative Director November 12, 2014

Trend Micro
FY2014.3Q Results
Mahendra Negi CFO, Representative Director
November 12, 2014
Copyright © 2014 Trend Micro Incorporated. All rights reserved.
1
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 uncertainties.
Many important factors could cause our actual results to differ materially from those expressed in our forwardlooking statements. These factors include:













difficulties in addressing new virus and other computer security problems;
timing of new product introductions and lack of market acceptance for our new products;
the level of continuing demand for , and timing of sales of , our existing products;
rapid technological change within the anti-virus software industry;
changes in customer needs for anti-virus software;
existing products and new product introductions by our competitors and the pricing of those products;
declining prices for our products and services;
the effect of future acquisitions on our financial condition and results of operations;
the effect of adverse economic trends on our principal markets;
the effect of foreign exchange fluctuations on our results of operations;
an increase in the incidence of product returns;
the potential lack of attractive investment targets; and
difficulties in successfully executing our investment strategy.
We assume no obligation to update any forward-looking statements.
Confidential | Copyright 2014 Trend Micro Inc.
FY2014. 3Q Financial Highlight
(Third quarter ended September 30, 2014)
Copyright © 2014 Trend Micro Incorporated. All rights reserved.
Q3 Consolidated Results
Three months
ended Sep 30,
Net sales
Cost of sales
Operating expenses
Operating income (Margin)
Ordinary income
Net income
3Q2013
27,069
4,890
14,161
8,017 ( 30%)
8,064
5,363
(in million Yen)
YoY
growth
3Q2014
28,615
+ 6%
5,272
+ 8%
14,768
+ 4%
8,574 (30%)
+ 7%
+ 12%
9,069
+ 7%
5,726
“For reference” Revenue before adjusting deferred revenue
Pre-GAAP
27,298
26,511
+ 3%
(excluding foreign exchange impact )
+ 0%
(Non-GAAP)
If currency exchange rates used for 3Q2013 were used for 3Q2014
Net sales
27,069
27,846
+ 3%
* The JPY amount for 3Q2014 shown above has been calculated by applying to each foreign currency net sales
amount for 3Q2014 the weighted average exchange rate between such foreign currency and JPY that was used to
convert the net sales amount denominated in such foreign currency for 3Q2013 into a JPY net sales amount for Japan
GAAP reporting purposes.
(Non-GAAP)
4
Progress (9 months)
(in million Yen)
Revenue
120,000
(Forecast) 112,000
108,314
100,000
(Progress of
Forecast: 75%)
83,941
80,000
(Forecast)
30,100
30,000
(Progress of
Forecast 82%)
25,000
29,450
24,630
79,885
(Progress of
FY2013Act: 74%)
60,000
40,000
Operating Income
35,000
55,325
52,815
21,786
20,000
15,000
27,517
10,000
13,769
8,937
25,783
20,000
(Progress of
FY2013Act 74%)
16,056
7,338
5,000
FY2013
0
FY2013
FY2014
FY2014
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q3 USD based Results (Non-GAAP)
(unaudited)
Three months
ended Sep 30,
3Q2013
3Q2014
Net sales
Cost of sales
Operating expenses
Operating income
Ordinary income
Net Income
273,540
49,421
143,106
81,012
81,492
54,198
275,153
50,698
142,008
82,446
87,207
55,062
(in thousand USD)
YoY change
+ 1%
+ 3%
- 1%
+ 2%
+ 7%
+ 2%
(Non-GAAP)
For each of the quarters shown in the table above, JPY Japan GAAP amounts have been converted to USD amounts
using the exchange rates of USD=98.96 JPY for 3Q2013 and 1 USD =104.00 JPY for 3Q2014, respectively, which are
the respective weighted average exchange rates used to convert USD net sales to JPY for these quarters.
Net Sales Growth by Region
(in million Yen)
14,000
13,058 + 7%
13,000 12,196
12,000
11,000
10,000
9,000
+ 1%
8,000
7,000
6,001 6,034
6,000
5,000
4,000
3,000
2,000
1,000
0
Japan
North America
(unaudited)
3Q2013
3Q2014
+ 7%
5,138 5,474
+ 7%
3,083 3,303
+ 15%
649 745
Europe
Asia Pacific
Latin America
Net Sales Growth by Region
(in million Yen)
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
If currency exchange rates used for 3Q2013 were used for 3Q2014:
13,058 + 7%
12,196
(0)
(unaudited)
* ( ) : difference from GAAP base
3Q2013
3Q2014
+ 1%
(-265)
- 4%
(-290)
6,001 5,743
+ 1%
(-178)
5,138 5,208
+ 9%
(-34)
3,083 3,125
649 711
Japan
North America
Europe
Asia Pacific
Latin America
* Each JPY amount for 3Q2014 shown above has been calculated by applying to the relevant foreign currency net sales amount for (Non-GAAP)
3Q2014 the weighted average exchange rate between such foreign currency and JPY that was used to convert the net sales
amount denominated
in such
foreign
currency
forInc.
3Q2013 into a JPY net sales amount for Japan GAAP reporting purposes.
Confidential
| Copyright
2012
Trend Micro
8
Decomposition of Revenue (vs. last year)
(unaudited)
Exchange impact
Asia Pacific
Latin America
Japan
Europe
+ 69M
+ 862M
+ 61M
North America
+ 769M
+ 41M
- 257M
2014Q3
Net
sales
2013Q3
28,615M
Net
sales
27,069M
(Non-GAAP)
07
2 0 Q1
07
2 0 Q2
07
2 0 Q3
07
2 0 Q4
08
2 0 Q1
08
2 0 Q2
08
2 0 Q3
08
2 0 Q4
09
2 0 Q1
09
2 0 Q2
09
2 0 Q3
09
2 0 Q4
10
2 0 Q1
10
2 0 Q2
10
Q
20 3
10
2 0 Q4
11
2 0 Q1
11
2 0 Q2
11
2 0 Q3
11
2 0 Q4
12
2 0 Q1
12
2 0 Q2
12
2 0 Q3
12
2 0 Q4
13
2 0 Q1
13
2 0 Q2
13
2 0 Q3
13
2 0 Q4
14
2 0 Q1
14
2 0 Q2
14
Q
3
20
Constant currency Revenue growth
(YoY)
(unaudited)
20%
15%
10%
5%
0%
-5%
(Non-GAAP)
• Each growth rate shown above is based on applying to each quarter the same currency rate as the previous year for the
same period
Sales by Segment
(in million Yen)
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
(unaudited)
Growth rate (YoY)
+ 12%
Consumer
All Enterprise
6,834
+ 2%
6,223
Japan
2,186 - 9%
348
3,847
North America
- 3%
+ 7%
+ 7%
5,126
796 + 1%
2,507
Europe
+ 5%
+ 6%
+ 9%
APAC
“Notice” As Sales by Segment numbers are just for internal use, they may be subject to some
Confidential | Copyright 2012 Trend Micro Inc.
changes hereafter.
17
727
- 23%
+ 16%
Latin America
(Non-GAAP)
“Cloud related” Gross sales
Gross Revenue
Deep Security / Hosted / CPVM / IDF
JPY'M
+ 25%
YoY
3,500
3,000
2,500
2,000
1,500
1,000
500
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
“Notice” As above numbers are just for internal use, they may be subject to some changes
hereafter.
(Non-GAAP)
Confidential | Copyright 2012 Trend Micro Inc.
2014
Q2
2014
Q3
% share by region
3Q2013
3Q2014
27,069 million Yen
28,615 million Yen
Latin
Asia America
Pacific
2%
11%
Latin
Asia America
Pacific
3%
12%
Europe
19%
North
America
22%
Japan
45%
Europe
19%
North
America
21%
Japan
46%
“For reference”
Pre-GAAP (Revenue before adjusting Deferred revenue)
(in million Yen)
12,923 12,857
(unaudited)
- 1%
3Q2013
3Q2014
+ 3%
+ 10%
5,535
5,678
4,723
+ 2%
4,274
3,152 3,225
+ 30%
625
Japan
North America
Europe
Asia Pacific
“Notice”
Pre-GAAP means Revenue before adjusting deferred revenue and sales return allowance.
Confidential
Trend Micro
As these numbers
are| Copyright
just for2012
internal
use,Inc.
they may be subject to some changes hereafter.
813
Latin America
(Non-GAAP)
“For reference”
Pre-GAAP (Revenue before adjusting Deferred revenue)
(in million Yen)
If currency exchange rates used for 3Q2013 were used for 3Q2014:
12,923 12,857 - 1%
(unaudited)
3Q2013
3Q2014
- 3%
+ 5%
5,535 5,382
- 3%
4,274 4,501
3,152
3,043
+ 24%
625
Japan
North America
Europe
Asia Pacific
“Notice”
Pre-GAAP means Revenue before adjusting deferred revenue and sales return allowance.
As these numbers
are| Copyright
just for2012
internal
use,Inc.
they may be subject to some changes hereafter.
Confidential
Trend Micro
774
Latin America
(Non-GAAP)
Deferred Revenue
(in million Yen)
98,000
94,000
90,000
86,000
82,000
78,000
74,000
70,000
66,000
62,000
58,000
54,000
50,000
(unaudited)
* Total of current and long term
92,859
87,381
88,904
94,631
94,396
94,973
88,360
83,751
78,547
Sep-'12 Dec-'12 Mar-'13 Jun-'13 Sep-'13 Dec-'13 Mar-'14 Jun-'14 Sep-'14
Deferred Revenue by Region
(in million Yen)
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
(unaudited)
54,019
54,023
* Total of current and long term
+ 0%
Jun-14
Sep-14
+ 6%
- 3%
+ 1%
14,987 15,818
+ 4%
14,781 14,326
9,132
9,267
1,475
Japan
North America
Europe
Asia Pacific
1,538
Latin America
Deferred Revenue by Region
If currency exchange rates used as of the end of 2Q2014 were used as of the end of 3Q2014:
(in million Yen)
(unaudited)
60,000
55,000
54,019
54,023 + 0%
(0)
50,000
* ( ) : difference from GAAP base
Jun-14
* Total of current and long term
Sep-14
45,000
40,000
35,000
30,000
25,000
- 2%
- 4%
(-1,175)
(-66)
- 1%
20,000
14,987 14,643
15,000
(-229)
14,781 14,260
9,132
10,000
+ 5%
(+5)
9,037
5,000
1,475
1,544
0
Japan
North America
Europe
Asia Pacific
Latin America
• Each JPY amount as of the end of 3Q2014 shown above has been calculated by applying to the relevant foreign
currency deferred revenue amount as of the end of 3Q2014 the exchange rate between such foreign currency and
JPY that was Confidential
used to convert
the
deferred
revenue
amount denominated in such foreign currency as of the end of
| Copyright
2012
Trend Micro
Inc.
2Q2014 into a JPY deferred
revenue
amount for
Japan GAAP reporting purposes.
(Non-GAAP)
Cost
(in million Yen)
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
-2,000
Stock options / Acquisition related costs
Office overhead
Administration
Goods / Software Amortization & Capitalization
476
2,829
2,680
1,736
1,362
370
3,174
3,117
1,833
1,391
8,707
9,473
1,259
1,403
3Q2013
4Q2013
(unaudited)
Salary & Benefit
Outside service
Selling & Marketing
305
2,858
2,820
2,908
3,249
1,653
1,357
9,308
559
-369
1Q2014
1,805
1,341
456
2,790
3,016
1,774
1,393
10,024
9,527
1,445
1,081
2Q2014
3Q2014
(Non-GAAP)
Pre-GAAP vs. Total Costs
(in million Yen)
(unaudited)
Pre-GAAP
32,000
30,000
28,000
26,000
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Total Costs
Pre-GAAP Margin
40%
37%
30,348
27,144
26,511
29,567
32%
35%
28,295
27%
28%
27,298
30%
27%
25%
24%
20%
20,601
19,052
20,688
20,764
20,041
15%
18,580
10%
5%
0%
2013Q2
2013Q3
* “Total costs” means COGS + SGA.
2013Q4
2014Q1
2014Q2
2014Q3
(Non-GAAP)
Cash flows
(unaudited)
(in million Yen)
3Q2013
3Q2014
YoY growth
Cash flows from operating activities
4,627
6,412
+ 39%
Cash flows from investing activities
- 4,650
- 4,422
-
Cash flows from financing activities
3,662
684
- 81%
99
1,225
+ 1133%
Effect of exchange rate changes
on cash and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of this
quarter period
Increase in cash due to merger of consolidated
subsidiary
3,739
3,899
+ 4%
61,109
45,042
- 26%
-
-
-
Cash and cash equivalents at end of this quarter
period
64,848
48,942
- 25%
Jun - 2014
5,219
Admin,
Business Process
Headcount
Sep - 2014
5,241
Admin,
Business Process
Sales, Marketing
806
827
1,505
Technical
Support
1,228
Research,
Development
1,659
1,208
Research,
Development
+ 22
1,682
(+ 0%)
579
583
Japan
Japan
APAC
681
APAC
US
US
639
1,545
Technical
Support
Latin 67
EMEA
Latin 66
EMEA
680
Sales, Marketing
3,251
654
3,260
22
Non-operating & Extra-ordinary Items
(unaudited)
Equity in gains of affiliated companies
Gain on sales of marketable securities
Other income
Exchange gain
19M
Interest income
12M
Other expense
1M
Gain on reversal of
stock option
9M
- 12M
33M
440M
Ordinary Income
Operating Income
9,069M
Income
before income taxes
9,079M
8,574M
(Non-GAAP)
Balance Sheet
(unaudited)
(in million Yen)
change
Sep-2014
49,785
+ 4,301
54,086
21,903
+ 143
22,046
134,054
+ 4,520
138,574
94,396
+ 577
94,973
40,236
+ 34
+ 852
40,270
Jun-2014
Assets
Cash & cash equivalents
Account receivable
(less allowance for doubtful accounts)
Marketable securities &
Securities investments
Liabilities
Deferred revenue
(total of current and long-term)
Shareholders’ Equity
Common Stock &
Additional paid in capital
Treasury Stock
- 19,044
- 18,192
24
Q3 Highlights
• Recovery of US Enterprise business
• Growth of strategic product revenues continues
• Operating margins maintained
25
Q3 Lowlights
• US Consumer business still declining
• Overall pricing pressure continues
26
FY2014 9 months Financial Highlight
(January ~ September, 2014)
Copyright © 2014 Trend Micro Incorporated. All rights reserved.
Consolidated Results (9 months)
9 months
ended Sep 30,
2013(Q1-Q3)
Net sales
Cost of sales
Operating expenses
Operating income
(Margin)
Ordinary income
Net income
79,885
14,736
43,362
21,786
(Progress vs.
last year’s
annual result)
(74%)
(74%)
23,742
14,938
(73%)
(76%)
(Progress vs.
current year’s
annual forecast)
2014(Q1-Q3)
YoY
growth
83,941
14,577
44,732
24,630
+ 5%
- 1%
+ 3%
+ 13%
(75%)
26,504
16,490
+ 12%
+ 10%
(83%)
85,161
+ 6%
( 29%)
( 27%)
(in million Yen)
(82%)
(86%)
“For reference” Revenue before adjusting deferred revenue
Pre-GAAP
80,430
(Non-GAAP)
28
(in million Yen)
40,000
Net Sales Growth by Region
35,905 37,225 + 4%
(unaudited)
FY2013 Q1-Q3
FY2014 Q1-Q3
35,000
30,000
+ 2%
25,000
+ 12%
17,567 17,972
16,701
14,940
20,000
15,000
+ 4%
9,509 9,895
10,000
+ 9%
5,000
1,962 2,146
0
Japan
North America
Europe
Asia Pacific
Latin America
29
(in million Yen)
40,000
35,000
Net Sales Growth by Region
(unaudited)
If currency exchange rates used for 2013(Q1-Q3) were used for 2014(Q1-Q3):
+ 4%
35,905 37,225 (0)
FY2013 Q1-Q3
FY2014 Q1-Q3
30,000
- 4%
(-1,076)
25,000
20,000
17,567 16,896
15,000
+2%
(-1,468)
+ 2%
(-229)
14,940 15,233
9,509 9,665
10,000
5,000
+ 9%
(-9)
1,962 2,137
0
Japan
North America
Europe
Asia Pacific
Latin America
* Each JPY amount for 2014(Q1-Q3) shown above has been calculated by applying to the relevant foreign currency net sales amount for
2014(Q1-Q3) the weighted average exchange rate between such foreign currency and JPY that was used to convert the net sales amount
denominated in such foreign currency for 2013(Q1-Q3) into a JPY net sales amount for Japan GAAP reporting purposes.
(Non-GAAP)
30
“For reference”
Pre-GAAP (Revenue before adjusting Deferred revenue)
(in million Yen)
(unaudited)
40,590 + 5%
FY2013 Q1-Q3
38,739
FY2014 Q1-Q3
+ 3%
17,315
16,862
+ 9%
+ 9%
14,757
13,566
9,325
10,186
+ 19%
1,936 2,311
Japan
North America
Europe
Asia Pacific
Latin America
“Notice”
(Non-GAAP)
Pre-GAAP means Revenue before adjusting deferred revenue and sales return allowance. (Non-GAAP)
As these numbers are just for internal use, they may be subject to some changes hereafter.
31
“For reference”
Pre-GAAP (Revenue before adjusting Deferred revenue)
If currency exchange rates used for 2013(Q1-Q3) were used for 2014(Q1-Q3):
38,739
40,590 + 5%
FY2013 Q1-Q3
FY2014 Q1-Q3
- 4%
- 0%
+ 7%
16,862 16,268
13,566
13,501
9,325 9,967
+ 19%
1,936 2,298
Japan
North America
Europe
Asia Pacific
Latin America
“Notice”
(Non-GAAP)
Pre-GAAP means Revenue before adjusting deferred revenue and sales return allowance.
As these numbers are just for internal use, they may be subject to some changes hereafter.
32
FY2014 Cost (9 months)
YoY Growth
(in million Yen)
70,000
60,000
50,000
40,000
30,000
20,000
1,406
8,436
392
8,469
8,336
9,173
5,439
4,147
5,233
4,092
26,816
28,860
10,000
0
(unaudited)
3,515
3,087
FY 2013 Q1-Q3
FY 2014 Q1-Q3
Goods / Software &
Capitalization
Selling & Marketing
- 72%
+ 0%
Administration
+ 10%
Outside service
- 4%
Office overhead
- 1%
Salary & Benefit
+ 8%
Stock option & Acqusition
related costs
Total
Headcount
- 12%
+ 2%
+ 2%
(Non-GAAP)
33
Projection for FY2014 Annual (Unchanged)
(unaudited)
For FY2014
Jan - Dec, 2014
Net Sales
Operating Income
Ordinary Income
Net Income
Expected
YoY growth
112,000
30,100
32,000
19,100
(in million Yen)
+ 3%
+ 2%
- 1%
- 3%
In case of excluding a foreign exchange impact (a rule of thumb)
Net Sales
+ 2%
(Non-GAAP)
Thank You
Appendix
(unaudited)
Quarterly Chart (1)
(in million Yen)
FY2013
Q1
Net s ale s
Q2
25,783
Co s t o f s ale s
FY2014
Q3
27,032
Q4
27,069
Q1
28,428
Q2
27,517
Q3
27,807
Q4
28,615
5,048
4,796
4,890
4,642
4,622
4,682
5,272
13,396
15,804
14,161
16,122
13,958
16,005
14,768
O pe r at in g in c o m e
7,338
6,430
8,017
7,663
8,937
7,119
8,574
O r din ar y in c o m e
7,646
8,031
8,064
8,713
9,686
7,748
9,069
N e t in c o m e
4,820
4,754
5,363
4,656
6,038
4,726
5,726
O pe r at in g e x pe n s e s
(Co s t s )
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Go o ds / S o ft war e
A m o r t iz at io n & Capit aliz at io n
S e llin g & Mar k e t in g
713
217
476
370
-369
305
456
2,688
2,917
2,829
3,174
2,820
2,858
2,790
A dm in is t r at io n
2,844
2,812
2,680
3,117
3,249
2,908
3,016
O u t s ide s e r vic e
1,737
1,964
1,736
1,833
1,653
1,805
1,774
O ffic e o ve r h e ad
1,380
1,404
1,362
1,391
1,357
1,341
1,393
S alar y & B e n e fit
8,408
9,701
8,707
9,473
9,308
10,024
9,527
429
1,330
1,008
1,131
287
1,116
853
S t o c k o pt io n c o s t
A c qu is it io n r e lat e d c o s t s
To t al
Th e n u m be r o f e m plo ye e s
A pplie d r at e t o ye n (U S $ )
A pplie d r at e t o ye n (Eu r o )
242
252
250
272
272
329
228
18,444
20,601
19,052
20,764
18,580
20,688
20,041
5,094
5,110
5,137
5,217
5,201
5,219
5,241
92.47
98.75
98.96
100.61
102.77
102.16
104.00
121.89
128.91
131.09
136.97
140.87
140.02
137.78
Appendix
(unaudited)
Quarterly Chart (2)
(in million Yen)
FY2013
( S ale s by r e g io n )
J apan
Q1
Q2
FY2014
Q3
Q4
Q1
Q2
Q3
Q4
11,742
11,966
12,196
12,645
11,934
12,232
13,058
US
5,480
6,085
6,001
6,047
5,998
5,939
6,034
Eu r o pe
4,779
5,022
5,138
5,631
5,632
5,594
5,474
A s ia P ac ific
3,143
3,282
3,083
3,416
3,288
3,302
3,303
L at in A m e r ic a
To t al
( S ale s by s e g m e n t )
A ll En t e r pr is e
637
675
649
687
662
739
745
25,783
27,032
27,069
28,428
27,517
27,807
28,615
Q1
( P r e - GA A P by r e g io n )
J apan
Q3
Q4
Q1
Q2
Q3
Q4
16,383
17,040
17,362
18,118
18,132
18,185
9,400
9,991
9,706
10,310
9,384
9,622
10,183
25,783
27,032
27,069
28,428
27,517
27,807
28,615
Co n s u m e r
To t al
Q2
Q1
Q2
Q3
Q4
Q1
Q2
18,432
Q3
Q4
13,004
12,811
12,923
11,834
14,865
12,866
12,857
US
5,694
5,632
5,535
5,906
5,877
5,760
5,678
Eu r o pe
4,434
4,857
4,274
8,172
4,875
5,159
4,723
A s ia P ac ific
3,016
3,157
3,152
3,669
3,273
3,687
3,225
625
685
625
766
675
821
813
26,774
27,144
26,511
30,348
29,567
28,295
27,298
L at in A m e r ic a
To t al
“Notice”
Pre-GAAP means Revenue before adjusting deferred revenue and sales return allowance.
As these numbers
are| just
for 2012
internal
use,Inc.
they may be subject to some changes hereafter.
Confidential
Copyright
Trend Micro
`