Financial Data and Key Metrics Changes - The company achieved a net income growth of 6% year-on-year to $541 million, with a net margin growth of 0.3 percentage points year-on-year [24] - Group revenue declined 4% year-on-year in nominal terms but was up 3% on a constant currency basis [25] - Basic earnings per share came in at 4.54 US cents, and an interim dividend of 8.0 HK cents was declared, maintaining the previous fiscal year's level [25] Business Line Data and Key Metrics Changes - Solutions & Services Group (SSG) revenue grew by 26% year-on-year to $1.7 billion, with operating profit increasing by 29% to $368 million [28] - Infrastructure Solutions Group (ISG) achieved record revenue of $2.6 billion, up 33% year-on-year, with operating profit increasing to $36 million [32] - Intelligent Devices Group (IDG) revenue declined by 11% to $14 billion, but maintained an operating profit margin of 7.4% [35] Market Data and Key Metrics Changes - The IT services market is growing at about 5% year-on-year, with segments like Device as-a-Service and Infrastructure as-a-Service experiencing high double-digit growth [66] - The server market is projected to reach $134 billion by 2025, with significant growth opportunities in edge infrastructure and storage [13] Company Strategy and Development Direction - The company is focused on diversifying growth engines, with non-PC businesses now representing 37% of group sales [25] - The strategy includes doubling R&D investments and enhancing ESG efforts, with R&D spending growing by 15% [8][39] - The company aims to maintain profitability while navigating external challenges and is committed to driving sustainable growth [50] Management's Comments on Operating Environment and Future Outlook - Management noted that external challenges are likely to persist, but they remain confident in their strategy and operational resilience [19] - The company expects to continue leveraging its diversified growth engines, particularly in SSG and ISG, which are anticipated to maintain hyper-growth [93] Other Important Information - The company reported a cash and cash equivalent balance of $5.6 billion, with operating cash flow improving to over $2 billion [26] - The company is committed to maintaining a healthy liquidity position to support growth opportunities amid economic uncertainty [85] Q&A Session Summary Question: Can the management share the production site of servers and the status of Lenovo's channel inventory? - Management confirmed multiple global production sites for servers, including new factories in Hungary and Mexico, and stated that server channel inventory is back to normal levels [56][57] Question: How to reconcile the data points for server performance and any slowdown in server prices? - Management indicated strong demand for servers and storage, with no observed slowdown, and highlighted significant growth in edge business [62][63] Question: What is the outlook for the PC market in 2023? - Management expects the PC market to remain flat to plus or minus 4%, with a positive long-term trajectory driven by digital transformation [69][91] Question: What is the company's strategy regarding cash management amid economic uncertainty? - Management plans to maintain a strong cash position to support business growth and refinance debt to mitigate the impact of higher interest rates [85]

Smarter technology for all Q1FY23 Earnings Announcement August 10, 2022 2022 Lenovo Internal. All rights reserved. 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 well as other statements based on projections, estimates and assumptions. In some cases, these stat ...

Lenovo Group Limited (OTCPK:LNVGY) Q1 2023 Earnings Conference Call August 9, 2022 9:30 PM ET Company Participants Jenny Lai – Vice President-Investor Relations Yang Yuanqing – Chairman and Chief Executive Officer Wong Wai Ming – Chief Financial Officer Kirk Skaugen – President-Infrastructure Solutions Group Luca Rossi – President-Intelligent Devices Group Ken Wong – President-Solutions and Services Group Sergio Buniac – President-Mobile Business Group and President of Motorola Conference Call Participants ...

Financial Performance - The net profit attributable to equity holders increased by 11% to $539 million, reaching a historical high for the first quarter[3]. - Revenue for the quarter was $16.96 billion, showing a year-on-year growth of 0%, but a 5% increase when excluding foreign exchange impacts[3][2]. - Non-HKFRS net profit attributable to equity holders grew by 35% to $556 million, reflecting strong operational performance[3][2]. - The gross profit margin improved by 0.2 percentage points to 16.9%[2][5]. - The operating profit increased by 5% to $777 million, with an operating profit margin rising by 20 basis points[5][2]. - Basic earnings per share increased to 4.39 cents, up from 4.02 cents year-over-year, while diluted earnings per share rose to 4.01 cents from 3.53 cents[17]. - The company reported a total comprehensive profit before tax for the period was $690,513 thousand, compared to $650,223 thousand for the same period in 2021, showing an increase of 6.2%[21]. - For the three months ended June 30, 2022, the basic earnings attributable to equity holders of the company were $515,707,000, compared to $466,065,000 for the same period in 2021, representing an increase of approximately 10.1%[57]. - The diluted earnings attributable to equity holders of the company for the three months ended June 30, 2022, were $524,190,000, up from $474,488,000 in the same period of 2021, reflecting a growth of about 10.5%[57]. Business Segment Performance - The infrastructure solutions business group achieved revenue growth of 14%, surpassing $2 billion for the first time[5][4]. - The solutions services business group recorded a 25% increase in profit, capitalizing on digital workplace and hybrid cloud opportunities[3][5]. - The smartphone segment within the smart devices business group achieved double-digit revenue growth despite overall revenue decline[3][6]. - The smart devices business group reported a revenue and profit decline of 3% and 2% year-over-year, respectively, with an operating profit margin of 7.5%[7]. - Non-PC sales increased by 12% year-over-year, accounting for 22% of the smart devices business group's revenue, driven by growth in 5G smartphone sales[7]. - The infrastructure solutions business group achieved a revenue growth of 14% year-over-year, reaching a record $2.1 billion, making it one of the fastest-growing infrastructure solution providers globally[8]. - The solutions services business group experienced a revenue increase of 23% year-over-year to $1.5 billion, with an operating profit of $329 million, reflecting a 22.6% operating profit margin, the highest among all business groups[10]. - The TruScale as-a-Service solutions expanded to high-performance computing (HPC), with operations services revenue growing by 73% year-over-year[11]. Strategic Initiatives and Future Outlook - The company aims to double net profit in the medium term, supported by strategic opportunities in digitalization and service-led transformation[13]. - The infrastructure solutions business group plans to leverage AI-driven edge computing and hybrid cloud solutions to capture growth opportunities in the SMB IT infrastructure sector[14]. - The solutions services business group is positioned to capture the increasing demand for "as-a-service" offerings, projected to account for over 50% of storage spending by 2024[15]. - The company is committed to achieving net-zero emissions by 2050 and will expand its sustainability initiatives, incorporating innovative ESG features into its service offerings[16]. Expenses and Investments - Research and development expenses rose by 10% to support various growth engines and business transformation initiatives[4]. - The company recorded a strategic investment fair value gain of $25 million, reflecting changes in the value of its investment portfolio[18]. - The company faced a net foreign exchange loss of $48 million, compared to a loss of $39 million in the previous year[18]. - The company reported a decrease in cash from financing activities, with borrowings of $3.532 billion and repayments of $3.507 billion, resulting in a net cash inflow of $25 million[39]. - Capital expenditures for the three months ended June 30, 2022, amounted to $386 million, up from $279 million in the same period of 2021, primarily due to increased investments in patents, technology, and construction projects[27]. Assets and Liabilities - As of June 30, 2022, the total assets of the group were $44.248 billion, a slight decrease from $44.511 billion on March 31, 2022[28]. - The group's equity attributable to shareholders increased to $5.180 billion from $4.991 billion as of March 31, 2022[28]. - The total liabilities decreased to $38.663 billion from $39.116 billion as of March 31, 2022[28]. - The cash and cash equivalents amounted to $3.846 billion, down from $4.023 billion as of March 31, 2022[32]. - The liquidity ratio as of June 30, 2022, was 0.88, slightly down from 0.89 on March 31, 2022[28]. - The outstanding notes and convertible bonds as of June 30, 2022, included $6.87 billion in notes due in 2023 and $10 billion in notes due in 2025[31]. - The net cash position as of June 30, 2022, was $394 million, down from $602 million on March 31, 2022[32]. - The loan-to-equity ratio was 0.62 as of June 30, 2022, compared to 0.63 on March 31, 2022[32]. Corporate Governance - The audit committee reviewed the unaudited financial performance for the three months ended June 30, 2022, ensuring compliance with accounting standards and internal controls[88]. - The company has not violated any corporate governance code provisions as of June 30, 2022, except for the roles of the chairman and CEO not being separated[88]. - William O. Grabe was appointed as the chief independent director, tasked with overseeing the performance evaluation of the chairman and CEO[89]. - The executive director is Yang Yuanqing, with non-executive directors including Zhu Linan and Zhao Linghuan, and independent non-executive directors including William O. Grabe, William Tudor Brown, Yang Zhiyuan, Gordon Robert Halyburton Orr, Hu Zhanyun, Yang Lan, Wang Xuehong, and Professor Xue Lan[90].

Financial Performance - Lenovo's revenue for the fiscal year 2022 reached $71.618 billion, a year-over-year increase of 18%[6] - Gross profit increased by 23% to $12.049 billion, with a gross margin of 16.8%, up 0.7 percentage points from the previous year[6] - Pre-tax profit surged by 56% to $2.768 billion, with a pre-tax profit margin of 3.9%, up 1.0 percentage points[6] - Net profit attributable to equity holders rose by 72% to $2.030 billion[6] - Earnings per share (basic) increased to 17.45 cents, up from 9.54 cents in the previous year[6] - Cash and cash equivalents grew by 29% to $4.023 billion, while total loans decreased by 14% to $3.421 billion[6] - Lenovo's revenue exceeded 450 billion RMB, approaching 460 billion RMB, with net profit growing faster year-over-year[12] - Lenovo achieved a record revenue of $71.6 billion, a year-on-year increase of 18%[22] - Net profit attributable to equity holders increased by 72% to $2 billion[22] - Net cash flow from operating activities reached a record $4.1 billion[23] - Lenovo reduced net debt by nearly $1.5 billion, achieving a net cash position[23] - Group revenue increased by 18% to a new milestone of $71.6 billion, driven by strong performance in cloud service IT infrastructure and SME IT infrastructure recovery[25] - Net profit surged by 72% to $2 billion, with net profit margin increasing by 89 basis points, nearly halfway to the three-year goal of doubling the margin[25] - Revenue for the fiscal year ending March 31, 2022, reached $71.62 billion, a significant increase from $60.74 billion in the previous year[78] - Gross profit for the year was $12.05 billion, with a gross margin of 16.8%, up from 16.1% in 2021[78] - Operating profit increased to $3.08 billion, compared to $2.18 billion in the previous year[78] - Net profit attributable to equity holders rose to $2.03 billion, up from $1.18 billion in 2021[78] - Basic earnings per share increased to 17.45 cents, compared to 9.54 cents in the previous year[78] - Total sales for the year reached approximately $71.618 billion, with net profit attributable to equity holders increasing by $852 million to $2.03 billion[79] - Gross margin rose by 0.7 percentage points to 16.8%, driven by higher average selling prices of personal computers[79] - The Infrastructure Solutions Group turned a profit of $6.703 million, compared to a loss of $130.227 million in the prior year[84] - The Solutions and Services Group reported a profit of $1.195 billion, up from $645.854 million in the previous year[84] - Net exchange losses increased to $157 million, up from $116 million in the prior year, due to currency fluctuations[79] - Financial expenses decreased by 11%, primarily due to lower borrowing rates and improved factoring efficiency[83] - The company recorded a net reversal of trade receivables impairment provisions of $11 million, compared to a net provision of $108 million in the previous year[79] - Total assets as of March 31, 2022, were $44.511 billion, with total liabilities of $39.116 billion[117] - Cash and cash equivalents totaled $4.023 billion as of March 31, 2022, with 37.2% in USD and 27.3% in RMB[117] - The company's current ratio improved to 0.89 as of March 31, 2022, compared to 0.85 in the previous year[117] - The company's net cash position improved to $602 million in 2022 from a net debt of $870 million in 2021, with total equity increasing to $5.395 billion from $3.611 billion[121] - The company's loan-to-equity ratio decreased to 0.63 in 2022 from 1.11 in 2021, indicating improved financial leverage[121] Business Segments and Strategy - The Intelligent Devices Business Group accounted for 83% of the company's revenue, maintaining the same percentage as the previous year[7] - Revenue from the China region accounted for 24% of total revenue, while the Americas contributed 31%[8] - Lenovo's three core business groups—IDG, ISG, and SSG—are advancing in parallel under the 3S strategy[12] - The SSG business group focuses on service-oriented transformation, offering end-to-end solutions and subscription-based services[13] - Lenovo is incubating emerging businesses such as edge computing, cloud services, and the metaverse[12] - Lenovo's "One Lenovo" sales platform and cross-business collaboration have driven effective strategy implementation[12] - Lenovo's "Everything as a Service" model integrates hardware, software, and services into a subscription-based offering[13] - The Infrastructure Solutions Group achieved profitability for the first time since the x86 business acquisition[23] - Infrastructure Solutions Group achieved record revenue of $7.1 billion, with double-digit growth in cloud service IT infrastructure and recovery in SME IT infrastructure[25] - Intelligent Devices Group set a record with $62.3 billion in sales, an 18% increase, driven by commercial recovery and strength in high-end segments like gaming[25] - Non-PC revenue within the Intelligent Devices Group grew by 26%, with significant market share gains in the smartphone segment, particularly in the US[27] - Infrastructure Solutions Group achieved a 13% revenue growth to $7.1 billion, driven by improved organizational structure and technical solutions[27] - Cloud service IT infrastructure business set a revenue record, while SME IT infrastructure business saw a strong recovery[27] - Gaming PC product revenue increased by 37% year-over-year, capturing market share in the gaming segment[27] - Infrastructure Solutions Group expanded its edge product portfolio, including the industry's richest GPU-dedicated edge designs, to capitalize on the growth potential in edge computing[27] - Solution Services Group revenue increased by 30% YoY to $5.4 billion, with operating profit up 40% YoY to $1.2 billion, achieving an operating margin of 22%[28] - Deferred revenue for the Solution Services Group grew by 30% YoY to a record $2.9 billion[28] - Support services revenue increased by 23% YoY, driven by higher service penetration and demand for IT services due to hybrid work models[28] - Managed services revenue surged by 63% YoY, with improved profitability[28] - Projects and solutions services revenue grew by 28% YoY, supported by enhanced solutions and partner tools[28] - In China, revenue grew by 29% YoY, with all three business groups achieving double-digit growth[28] - Americas sales increased by 24% YoY, driven by strong demand for commercial PCs and enhanced mobile business product portfolio[28] - Europe, Middle East, and Africa revenue rose by 15% YoY, with strong PC and smartphone sales[28] - Asia Pacific (excluding China) revenue declined by 1% YoY, primarily due to slower education market sales in Japan[28] - Lenovo's 3S strategy (Smart IoT, Smart Infrastructure, and Industry Intelligence) drives its mission as a leader and enabler of intelligent transformation[32] - Lenovo's Truscale ("as-a-service") model has successfully leveraged its intellectual property to build repeatable solutions[32] - The company restructured into three business groups: IDG, ISG, and SSG, to support its 3S strategy and service-oriented transformation[76] - Lenovo plans to double its R&D investment over the next three years, focusing on new IT architecture and core technologies[77] - The company launched the TruScale brand and emphasized its commitment to innovation, service-oriented transformation, and ESG as key pillars of its strategy[77] Research and Development - Lenovo's R&D investment is expected to double by the end of FY2023/24 compared to FY2020/21, with 12,000 R&D talents[13] - R&D expenses grew by 43% year-on-year to support technology and service upgrades[23] - R&D investment increased by 43% year-over-year, with plans to double the investment by the end of FY23/24 compared to FY20/21 levels[27] - Lenovo plans to double its R&D investment in innovation within 3 years[32] - The company increased its R&D investments to drive innovation and smart technology transformation, aiming for long-term value creation[128] Environmental, Social, and Governance (ESG) - Lenovo's asset recovery services ensure that less than 1% of retired devices end up in landfills, with a focus on data security and privacy[5] - Lenovo is committed to ESG (Environmental, Social, and Governance) initiatives, integrating sustainability into operations[13] - Lenovo maintained a global female employee ratio of 36%, leading the industry[14] - Lenovo was included in the Bloomberg Gender-Equality Index and recognized for leading levels in CDP water security and climate surveys[24] - Lenovo set a vision to achieve net-zero emissions by 2050 and is collaborating with the Science Based Targets initiative[14] - Lenovo was added to the Hang Seng Index in March 2022, reflecting its consistent performance and successful transformation[24] - Lenovo's ISO 14001:2015 certified Environmental Management System (EMS) focuses on climate change, energy efficiency, and sustainable materials[50] - Lenovo conducts annual Significant Environmental Aspects (SEA) assessments to identify and manage environmental risks and opportunities[50] - Lenovo's climate strategy is overseen by the Environmental, Social, and Governance (ESG) Oversight Committee, reporting annually to the board[51] - Lenovo uses the GeSI-CDP scenario analysis tool to assess climate-related risks and opportunities, aligning with TCFD guidelines[52] - Lenovo has set science-based emission reduction targets, validated by the Science Based Targets initiative (SBTi), aligned with the Paris Agreement's 1.5°C goal[52] - Lenovo's climate and energy policy focuses on internal operations, energy suppliers, supply chain, customers, and public advocacy for a low-carbon economy[52] - Lenovo monitors and reports progress on Scope 1, 2, and 3 emissions annually in its ESG report[52] - Lenovo's risk management includes climate-related risks as part of its Enterprise Risk Management (ERM) and SEA processes[52] - Lenovo has committed to achieving net-zero emissions by 2050 and has signed the SBTi commitment letter to set science-based targets, aligning with the 1.5°C climate goal[53] - Lenovo supports the development of climate science-aligned standards and participated in the testing of the SBTi Net-Zero Standard before its launch in October 2021[53] - Lenovo is working towards accurate and meaningful climate-related financial disclosures to comply with the TCFD framework by 2025[53] - Lenovo ensures environmental compliance through a global network of internal and external experts, third-party labs, and internal tools and processes[57] - Lenovo emphasizes ethical and legal business practices, with a strong focus on anti-bribery, anti-corruption, and fair competition policies[58][59] - Lenovo values intellectual property and uses patents, copyrights, trademarks, and other legal protections to safeguard its innovations[60] - Lenovo maintains a global privacy and data protection program, led by the legal department, to ensure compliance with privacy policies and regulations[63] - Lenovo's compliance culture is supported by a global network of regional and functional partners, ensuring adherence to applicable laws and regulations[54] - Lenovo's environmental compliance process involves regular updates to standards, specifications, and procedures, with input from regional and industry stakeholders[55] - Lenovo's trade compliance commitment includes adhering to customs, import controls, export controls, economic sanctions, and anti-boycott regulations[63] - Lenovo's Love on Global Service Month in September 2021 involved employees from 66 countries, with increased participation in volunteer activities despite the COVID-19 pandemic[69] - Lenovo Foundation's TransforME donation initiative contributed $1 million in FY 2021-22 to organizations providing adult training in data analytics, software development, and IT support[69] - Lenovo achieved a CDP Water A-list rating and Climate A- rating in 2021, recognizing its environmental disclosure and risk management[72] - Lenovo received the highest rating (AA+) in the IT industry and the best overall score in the 2021 Hang Seng Corporate Sustainability Index[72] - Lenovo was named among the 2022 Global 100 Most Sustainable Corporations for the third consecutive year, based on 23 key performance indicators[72] - Lenovo scored 100% in the 2021 Disability Equality Index (DEI) and was recognized as a "Best Place to Work for Disability Inclusion"[73] - Lenovo was included in the 2022 Bloomberg Gender-Equality Index, highlighting its commitment to gender equality in leadership and pay[73] - Lenovo received a perfect score of 100 and was named a "Best Place to Work for LGBTQ Equality" in the Human Rights Campaign Foundation's 2022 Corporate Equality Index for the fifth consecutive year[73] - Lenovo's ESG performance was recognized with a gold award from HKICPA and a top-rated ESG performer rating by Sustainalytics for the Asia/Pacific region[74] - The company is committed to achieving net-zero emissions and supporting global transitions to a low-carbon economy, with further details to be disclosed in its ESG report in August 2022[128] - The company has established an Environmental, Social, and Governance (ESG) Oversight Committee to promote a strong ESG culture[134] Risk Management and Compliance - Lenovo faces intense competition in the industry, requiring continuous innovation and differentiation to maintain market share[33] - Global macroeconomic and geopolitical conditions pose risks to Lenovo's financial performance[34] - Lenovo's strategy includes prioritizing and focusing on strategic goals to allocate resources effectively[33] - Lenovo's supply chain and product quality management are critical to maintaining brand reputation and customer loyalty[37] - The company faces risks related to economic, political, and regulatory uncertainties, as well as market volatility, which could impact potential acquisitions[38] - The company is investing in cybersecurity measures, including employee training, improved policies, and robust incident response plans to mitigate network attack risks[39] - The company has established a financial risk management program to address uncertainties in financial markets and reduce potential adverse impacts on financial performance[40] - The company closely monitors market developments and enhances collection capabilities to mitigate risks related to reduced cash flow and delayed receivables[40] - The company actively collaborates with brokers and credit insurance companies to maintain credit insurance coverage and manage uninsured losses[40] - The company is vigilant about international tax environment changes to ensure compliance and minimize risks related to tax rules and regulations[41] - The company takes legal measures to protect proprietary technology, apply for patents, and register trademarks and copyrights to mitigate intellectual property risks[42] - The company develops and implements intellectual property litigation defense strategies and collaborates with other technology/product companies to advocate for patent system reforms[42] - The company manages supply chain risks through cost and operational analysis, optimizing efficiency, and diversifying supplier sources to avoid single-source dependencies[43] - The company has invested in risk engineering projects to enhance the resilience of its own production sites, especially critical locations, and has implemented disaster recovery plans to minimize the impact of regional disasters[43] - The company is committed to ESG practices across its supply chain, ensuring suppliers comply with labor, environmental, health, safety, and ethical standards through contractual systems and RBA membership[44] - The company strengthened its supply chain due diligence in FY21/22 by integrating EcoVadis' IQ sustainability assessment tool into its supplier management practices, enabling risk identification and annual improvements[44] - The company faces intense competition for skilled and experienced talent and is focusing on employer branding, competitive compensation, and talent development programs to attract and retain top talent[45] - The company is implementing diversity and inclusion initiatives, such as hiring and promoting women, people of color, and individuals with disabilities, and conducting pay equity audits[45] - The company is optimizing operational efficiency and cross-departmental collaboration to support strategy execution and manage the transition to new products and technologies[46] - The company is closely monitoring demand and inventory levels to address supply and capacity gaps, and is preparing contingency plans to avoid business disruptions caused by the COVID-19 pandemic[47] - The company is exploring new business opportunities in online healthcare and education, leveraging its e-commerce platform and digital tools to engage customers and drive online sales[47] - Lenovo established a global COVID-19 prevention committee (LEPCC) to ensure employee safety and business continuity during the pandemic[48] - Lenovo implemented advanced security measures for remote work, including laptop protection and phishing training for employees and contractors[48] - The company has a continuous disclosure policy to monitor, report, and release insider information in a timely manner[186] - The company has arranged appropriate insurance for Board members to cover any liability arising from corporate activities, with coverage reviewed annually[187] - The company has established procedures and guidelines to handle actual or potential conflicts of interest among directors, including individual consideration of appointments and mandatory disclosure of interests[157] - Directors are required to commit sufficient time and focus to the company's affairs, with guidelines provided on the expected time commitment and disclosure of other directorships[158] - The number of directorships held by directors in other listed companies ranges from 0-2 for 6 directors, 3-5 for 2 directors, and 6-8 for 1 director[159] - The company has adopted a share ownership guideline for non-employee directors to align their interests with long-term shareholder interests[161] - Directors are required to comply with the Model Code for Securities Transactions, with all directors confirming compliance for the year ended March 31, 2022[162] - The company has a formal and transparent process for determining the remuneration of directors and senior management[176] - The Board of Directors is responsible for overseeing the overall strategy and ensuring the company's operations comply with relevant laws and regulations[177] - The company holds at least four Board meetings annually, approximately quarterly, to review financial performance, strategy, and operations[182] - Monthly updates on the company's latest financial performance are provided to the Board between regular meetings[185] - The company has enhanced the experience of using Lenovo's best laptop products for Board members by providing newer models to ensure compatibility and efficient use[187] - The Board focuses on financial and operational performance, including reports from the CEO and CFO, and updates on financial and operational matters[189] - The Board discusses major strategic issues related to business groups, regions, and structures, and reviews the process and monitoring of strategic and operational risks[190] - The Board reviews and discusses governance practices and sustainability matters, including environmental, social,

Lenovo Group Limited (OTCPK:LNVGY) Q4 2022 Earnings Conference Call May 26, 2022 3:00 AM ET Company Participants Jenny Lai - VP of IR Yang Yuanqing - Chairman & CEO Wai Wong - Group CFO Luca Rossi - President of Intelligent Devices Group Kirk Skaugen - President of Infrastructure Solutions Group Sergio Buniac - President of Latin America & Mobile Business Group & President of Motorola Ken Wong - President of Solutions and Services Group Conference Call Participants Jenny Lai Good morning, good afternoon and ...

Smarter technology for all Q4 and FY22/23 Earnings Announcement May 24, 2023 2023 Lenovo Internal. All rights reserved. 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 well as other statements based on projections, estimates and assumptions. In some cases, these ...

Financial Data and Key Metrics Changes - Lenovo reported a record net income of $640 million, up 62% year-on-year, marking the sixth consecutive quarter of over 50% year-on-year net income growth [7][21] - Quarterly revenue reached $20 billion for the first time, reflecting a 17% year-on-year growth, with net margin increasing by nearly one point year-on-year [7][21] - Basic earnings per share increased to $5.50, representing a 66% growth year-on-year [21] Business Line Data and Key Metrics Changes - Solutions and Services Group (SSG) revenue grew over 25% year-on-year, with an operating margin exceeding 22%, a nearly three-point increase year-on-year [10][25] - Infrastructure Solutions Group (ISG) became profitable for the first time since its acquisition in 2014, with revenue growing at double-digit rates for the fourth consecutive quarter [12][29] - Intelligent Devices Group (IDG) revenue grew 16% year-on-year, with profit increasing by 21%, driven by strong performance in both PC and smartphone segments [15][30] Market Data and Key Metrics Changes - The global IT services market is projected to grow significantly, with enterprise spending expected to increase faster in cloud and digital services [9] - The Edge infrastructure market is expected to grow to $41 billion by 2025, presenting substantial opportunities for ISG [12] - The smartphone market saw Lenovo achieve a 46% year-on-year revenue growth, with significant market share gains in North America and Latin America [32] Company Strategy and Development Direction - Lenovo plans to double R&D investments along its New IT architecture to enhance digital foundations and support business growth [8][22] - The company aims to leverage the shift towards remote work and digital transformation to expand its service offerings and capture emerging market opportunities [11][35] - Lenovo is committed to achieving a net-zero emissions target by 2050 and has received recognition for its sustainability initiatives [33][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued double-digit growth across all business segments, despite challenges in the PC market [44][45] - The company anticipates stable market conditions with increasing average unit prices, driven by a shift from consumer to commercial segments [80] - Management highlighted the importance of digital transformation and remote collaboration as key drivers for future demand [80] Other Important Information - Lenovo was added to the Hang Seng Index, reflecting its strong operational performance [5][40] - The company reported strong operating cash flow of $606 million, despite higher working capital requirements due to supply chain challenges [23][24] Q&A Session Summary Question: Guidance for different segments in the new fiscal year and share price decline after strong results - Management confirmed strong growth across all businesses and expressed confidence in continued growth, particularly in ISG and SSG, despite flat PC shipments [44][46] - CFO suggested that market volatility and short-term trading may have contributed to the share price decline, but analysts remain optimistic about the company's fundamentals [46][47] Question: Channel inventory situation in the PC market and server business outlook - Management indicated that channel inventory is normalizing and remains below pre-COVID levels, which is not a cause for concern [53][54] - ISG is expected to see strong growth in the server and storage markets, with confidence in future profitability [56][59] Question: M&A considerations for service business and mobile strategy in Europe and Asia - Management is exploring both organic and inorganic growth strategies for SSG, emphasizing a healthy balance sheet to support potential M&A [64][65] - The mobile strategy focuses on selective market expansion in Europe and Asia, with a careful approach to ensure sustainable and profitable growth [66][68] Question: AI server strategy and collaboration with chip companies - Management highlighted AI as a significant growth opportunity, with plans to enhance collaboration with chip suppliers for future developments [72] - The Edge business is also expected to grow, with new product lines being introduced to meet market demands [72] Question: Impact of economic and geopolitical issues on PC market outlook - Management remains confident in a stable PC market with increasing average unit prices, driven by digital transformation and remote work trends [80]

Smarter technology for all 3QFY22 Earnings Announcement Feb 23, 2022 2022 Lenovo Internal. All rights reserved. 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 other statements based on projections, estimates and assumptions. In some cases, these statements c ...

Financial Performance - Lenovo Group achieved a record net profit of $640 million for the three months ended December 31, 2021, representing a year-on-year growth of 62%[4]. - The group's revenue for the third fiscal quarter exceeded $20.1 billion, marking a 17% increase compared to the same period last year[6]. - Revenue for the nine months ended December 31, 2021, was $54.924 billion, representing a 22% increase compared to $45.112 billion for the same period in 2020[19]. - The company reported a net profit of $1.72 billion for the nine months ended December 31, 2021, compared to $1.03 billion for the same period in 2020, indicating a growth of approximately 66.9%[37]. - The operating profit for the nine months ended December 31, 2021, was $2.49 billion, compared to $1.70 billion for the same period in 2020, reflecting a year-over-year increase of about 46%[37]. - The company reported a net profit of $681.7 million for the three months ending December 31, 2021, compared to $431.4 million for the same period in 2020, representing a 58% increase[38]. Revenue Growth - The smart devices business group saw a revenue increase of 16% year-on-year, contributing to a record operating profit margin[2]. - The Solutions Services Business Group reported a 25% revenue increase to $1.5 billion and a 44% increase in operating profit to $332 million, with an operating profit margin of 22.2%[10]. - Revenue from the smart devices business group reached $17.609 billion, with an operating profit of $1.352 billion for the three months ended December 31, 2021[28]. - Revenue from the China region was $14,736,639 thousand for the nine months ended December 31, 2021, up from $10,873,643 thousand in 2020, reflecting a growth of approximately 35%[49]. - The Americas region generated revenue of $17,481,734 thousand, an increase from $13,876,429 thousand in the previous year, marking a growth of about 26%[49]. Profitability Metrics - The group achieved a gross profit margin of 16.7%, up 0.5 percentage points year-on-year[3]. - The net profit margin reached 3.2%, marking seven consecutive quarters of year-on-year growth[6]. - The operating profit for the smart devices business group was $3.61 billion for the nine months ended December 31, 2021, compared to $2.76 billion in the same period of 2020, reflecting a 31% increase[23]. - The group reported a total comprehensive income of $1.7 billion for the nine months ending December 31, 2021, up from $1.3 billion in the same period of 2020, indicating a growth of approximately 34%[38]. Research and Development - Research and development spending increased by 38% year-on-year to support technology and service upgrades[5]. - The company plans to significantly increase R&D investment to achieve its mid-term goal of doubling net profit and to support long-term growth strategies[14]. - The company plans to invest in R&D to enhance competitiveness in next-generation product design and solutions, including the recent launch of enhanced Lenovo Open Cloud Automation Management software[17]. Operating Expenses and Cash Flow - Operating cash flow exceeded $2.6 billion year-to-date, with net debt reduced by $3.2 billion over the past 10 quarters[5]. - Operating expenses increased by 24%, driven by higher employee benefits costs and increased marketing investments of $262 million to boost brand awareness[21]. - The company reported a decrease in cash generated from operating activities, primarily due to increased interest and tax payments[41]. Market and Product Development - The company aims to enhance its product portfolio in the enterprise IT infrastructure sector to improve profitability and capture growth opportunities in AI-driven edge, hybrid cloud, and telecommunications solutions[16]. - The service business is identified as a structural growth engine, with a focus on expanding the TruScale as-a-service product portfolio to address customer pain points in hybrid work and multi-cloud management[17]. - The company has established a new Solutions Services Business Group to enhance service capabilities and provide new solutions, effective from March 31, 2022[46]. Foreign Exchange and Financial Management - The company reported a net foreign exchange loss of $109 million, highlighting challenges posed by currency fluctuations[21]. - The company recorded a net loss of $108.9 million from foreign exchange for the nine months ended December 31, 2021, compared to a loss of $37.4 million in the same period of 2020, indicating a significant increase in losses[22]. - The group has implemented consistent hedging policies to mitigate the impact of foreign currency fluctuations on daily operations[35]. Sustainability and Governance - The company is exploring pathways to achieve carbon neutrality by 2050, expanding sustainability initiatives and integrating innovative ESG features into its service offerings[18]. - The company has not violated any corporate governance codes as of December 31, 2021, except for the combined roles of the Chairman and CEO[89]. - The board appointed William O. Grabe as the Chief Independent Director to enhance governance and oversight[90].