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2009 Q1 E Final

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Trend Micro FY2009 1Q Results

Trend Micro FY2009 1Q Results

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  • 1. Trend Micro FY2009. 1Q Results Mahendra Negi COO / CFO , Representative Director May 12, 2009
  • 2. 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 forward-looking 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. 2 Copyright 2009 - Trend Micro Inc.
  • 3. FY2009. 1Q Financial Highlight (First quarter ended March 31, 2009) 3 Copyright 2009 - Trend Micro Inc.
  • 4. Consolidated Results Three months (in million Yen) (unaudited) ended Mar 31, 1Q2008 1Q2009 YoY growth Net sales 25,604 22,915 - 11% Cost of sales 4,054 3,597 - 11% Operating expenses 13,211 12,289 - 7% Operating income (Margin) 8,338 (33%) 7,028 (31%) - 16% Ordinary income 7,517 7,936 6% Net income 4,594 4,821 5% (In accordance with Japan GAAP) Amount of contracts concluded Bookings 24,302 27,456 + 13% ( In case of excluding a foreign exchange impact ) + 2% (Non-GAAP) If currency exchange rates used for 1Q2008 were used for 1Q2009 Net sales 25,604 25,871 + 1% * The JPY amount for 1Q2009 shown above has been calculated by applying to each foreign currency net sales amount for 1Q2009 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 1Q2008 into a JPY net sales amount for Japan GAAP reporting purposes. 4 (Non-GAAP) Copyright 2009 - Trend Micro Inc.
  • 5. USD based Results (Non-GAAP) (unaudited) Three months (in thousand USD) ended Mar 31, 1Q2008 1Q2009 YoY change Net sales 244,128 244,324 0% Cost of sales 38,661 38,352 - 1% Operating expenses 125,967 131,033 4% Operating income 79,500 74,938 - 6% Ordinary income 71,678 84,615 18% Net Income 43,802 51,408 17% (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=104.88 JPY for 1Q2008 and 1 USD =93.79 JPY for 1Q2009, respectively, which are the respective weighted average exchange rates used to convert USD net sales to JPY for these quarters. 5 Copyright 2009 - Trend Micro Inc.
  • 6. Net Sales Growth by Region (in million Yen) (unaudited) 10,000 9,823 9,784 - 0% 9,000 1Q2008 8,000 - 4% 1Q2009 7,000 6,178 5,953 6,185 - 23% 6,000 5,000 4,748 4,000 - 31% 3,000 2,680 2,000 1,842 - 20% 1,000 735 585 0 Japan US Europe Asia Pacific Latin America (In accordance with Japan GAAP) 6 Copyright 2009 - Trend Micro Inc.
  • 7. Net Sales Growth by Region If currency exchange rates used for 1Q2008 were used for 1Q2009: (in million Yen) (unaudited) * ( ) : difference from GAAP base 10,000 9,823 9,784 - 0% (0) 9,000 + 8% (+704) 1Q2008 8,000 - 1% (+1,384) 1Q2009 7,000 6,657 6,178 6,185 6,133 6,000 5,000 - 10% 4,000 (+578) 3,000 2,680 2,421 + 19% (+289) 2,000 1,000 735 874 0 Japan US Europe Asia Pacific Latin Am erica * Each JPY amount for 1Q2009 shown above has been calculated by applying to the relevant foreign currency net (Non-GAAP) sales amount for 1Q2009 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 1Q2008 into a JPY net sales amount for 7 Japan GAAP reporting purposes. Net sales in Europe were all reported in Euro. Net sales in Asia Pacific and Latin America were reported in more than one foreign currency. Copyright 2009 - Trend Micro Inc.
  • 8. Decomposition of Revenue (vs Last year) Japan (unaudited) Europe Asia Pacific - 39M - 52M US + 138M - 259M + 479M Exchange impact - 2,956M 2008Q1 Net sales 2009Q1 Net sales 25,604 M 22,915 M (Non-GAAP) 8 Copyright 2009 - Trend Micro Inc.
  • 9. Sales by Segment 10,000 Growth rate 9,000 Consumer + 5% 8,000 All Enterprise 4,570 - 17% 7,000 6,000 5,000 2,564 277 4,000 3,000 5,213 4,471 2,000 3,389 386 1,000 18 1,456 566 0 Japan US Europe APAC Latin America (Non-GAAP) 9 Copyright 2009 - Trend Micro Inc.
  • 10. % share by region (unaudited) 1Q2008 1Q2009 25,604 million Yen 22,915 million Yen Latin Latin America America Asia Asia Pacific 3% Pacific 3% 8% 10% Japan Europe Japan Europe 38% 21% 43% 24% US US 24% 26% (In accordance with Japan GAAP) 10 Copyright 2009 - Trend Micro Inc.
  • 11. Bookings (Amount of contracts concluded) (in million Yen) (unaudited) + 8% 12,628 11,696 1Q2008 1Q2009 + 41% 7,358 - 1% 5,226 4,608 4,584 + 6% 2,153 2,040 + 0% 730 730 Japan US Europe Asia Pacific Latin Am erica (Non-GAAP) * Bookings = Net sales + Deferred revenue balance as of this Q – Deferred revenue balance as of previous Q 11 Copyright 2009 - Trend Micro Inc.
  • 12. Local currency based Bookings (US, Europe) US Bookings in $ and EMEA Bookings in € (unaudited) 1Q2008 1Q2008 ($ in thousands) 1Q2009 (€ in thousands) 1Q2009 80,000 40,000 71,682 - 10% 36,421 + 6% 70,000 35,000 34,384 64,358 60,000 30,000 50,000 25,000 40,000 20,000 30,000 15,000 20,000 10,000 10,000 5,000 0 0 US Europe (Non-GAAP) 12 Copyright 2009 - Trend Micro Inc.
  • 13. Deferred Revenue (unaudited) (in million Yen) * Total of current and long term 70,000 68,000 69,817 66,000 67,516 69,707 64,000 66,152 65,166 62,000 60,000 58,000 56,000 54,000 52,000 50,000 Mar-'08 Jun-'08 Sep-'08 Dec-'08 Mar-'09 (In accordance with Japan GAAP) 13 Copyright 2009 - Trend Micro Inc.
  • 14. Deferred Revenue by Region (in million Yen) (unaudited) 40,000 9% * Total of current and long term 34,367 35,000 31,523 Dec-08 30,000 Mar-09 25,000 9% 20,000 17,340 -1% 15,935 15,000 12,359 12,195 10,000 7% 14% 5,000 4,326 4,637 1,021 1,167 0 Japan US Europe Asia Pacific Latin America (In accordance with Japan GAAP) 14 Copyright 2009 - Trend Micro Inc.
  • 15. Deferred Revenue by Region If currency exchange rates used as of the end of 4Q2008 were used as of the end of 1Q2009: (in million Yen) (unaudited) * ( ) : difference from GAAP base 40,000 9% * Total of current and long term (0) 35,000 34,367 31,523 Dec-08 30,000 Mar-09 25,000 (-1,325) 0% 20,000 (-157) -3% 15,935 16,014 15,000 12,359 12,037 10,000 1% (-279) 8% (-69) 5,000 4,326 4,357 1,021 1,098 0 Japan US Europe Asia Pacific Latin America (Non-GAAP) * Each JPY amount as of the end of 1Q2009 shown above has been calculated by applying to the relevant foreign currency deferred revenue amount as of the end of 1Q2009 the exchange rate between such foreign currency and JPY that was used to convert the deferred revenue amount denominated in such foreign currency as of the end of 4Q2008 into a JPY deferred 15 revenue amount for Japan GAAP reporting purposes. Deferred revenue of Europe were all reported in Euro. Deferred revenues of Asia Pacific and Latin America were reported in more than one foreign currency. Copyright 2009 - Trend Micro Inc.
  • 16. Cost (in million Yen) (unaudited) Stock option & Goodwill Salary & Benefit Office overhead Outside service Administration Selling & Marketing Goods 20,000 18,000 603 470 451 16,000 3,198 519 2,886 3,342 743 2,954 14,000 2,411 2,647 2,696 2,474 12,000 2,791 2,252 2,388 10,000 1,968 2,086 2,356 1,896 1,154 1,287 1,320 8,000 990 1,259 6,000 7,366 7,101 7,332 6,538 4,000 6,249 2,000 0 723 809 894 836 785 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 (Non-GAAP) 16 Copyright 2009 - Trend Micro Inc.
  • 17. Bookings vs Total costs (in million Yen) (unaudited) Bookings Total Costs 32,000 30,000 29,769 28,000 26,000 27,456 24,000 22,000 24,302 23,667 20,000 21,680 18,000 18,385 16,000 17,266 17,552 16,699 14,000 15,886 12,000 10,000 8,000 6,000 4,000 2,000 0 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 (Non-GAAP) * “Total costs” means COGS + SGA. 17 Copyright 2009 - Trend Micro Inc.
  • 18. Q1 Highlights • Operating margins maintained at 31% despite tough economic environment • EMEA business improves • New technology (hosted services, TMS, encryption…) start showing results • Acquired Third Brigade 18 Copyright 2009 - Trend Micro Inc.
  • 19. Q1 Lowlights • New business growth still below plan • Weak performance of Enterprise business 19 Copyright 2009 - Trend Micro Inc.
  • 20. Third Brigade acquisition • Announced 29th April • Provides Trend with IDS/IPS technology, as well as web application protection, application control, integrity monitoring and log inspection, extending the level of protection on the server, whether physical, virtual or in the cloud • Already had successful OEM relationship for end point ID Firewall. 20 Copyright 2009 - Trend Micro Inc.
  • 21. Headcount Dec - 2008 Mar - 2008 4,120 4,239 ADM, Business Process ADM, Sales, Business Process 616 Marketing Sales, 618 Marketing 1,087 + 119 1,154 Technical (+ 3%) Support Technical Research, Support 1,309 Development Research, 1,341 Development 1,108 1,126 21 Copyright 2009 - Trend Micro Inc.
  • 22. Net sales vs Headcount Leveraging the global market for human talent – Development / support teams in four continents 100% 90% LA 80% APAC EMEA 70% USA 60% Japan 50% 40% 30% 20% 10% 0% Revenues Head count 22 Copyright 2009 - Trend Micro Inc.
  • 23. Non-operating & Extra-ordinary Items Other income (unaudited) Interest expense Equity in gains of affiliated companies 33 M 1M Loss on sales of marketable securities Exchange gain 8M 328M Other expense 62M 814 M Interest income 443M Ordinary Income Income before income taxes Operating income 7,936 M 7,936 M 7,028M (In accordance with Japan GAAP) 23 Copyright 2009 - Trend Micro Inc.
  • 24. Balance Sheet (unaudited) (in million Yen) Dec-2008 change Mar-2009 Assets Cash & cash equivalents 60,861 + 7,008 67,869 Account receivable (less allowance for doubtful accounts) 21,728 + 47 21,775 Marketable securities & Securities investments 59,415 - 6,567 52,848 Liabilities Deferred revenue (total of current and long-term) 65,166 + 4,541 69,707 Shareholders’ Equity Common Stock & 39,495 +0 39,495 Additional paid in capital Treasury Stock - 21,798 -3 - 21,801 (In accordance with Japan GAAP) 24 Copyright 2009 - Trend Micro Inc.
  • 25. Snapshot of our CDO investments (Update) # We don’t have any CDOs related to RMBS (e.g. Subprime mortgages). # Since the underlying cash flow is intact, we intend to hold till maturity. # Exposure as a % of our “Marketable securities & Securities investments” : 2% # Exposure as a % of our “Cash + Marketable securities & Securities investments” : 1% (in million Yen) Beginning Market value Maturity Name Vendor Write-down Unrealized P/L Loss ratio Current Rating Collateral principal as of 2009 Mar. 31 date Corporate BERYL FINANCE Lehman Bro. 1,000 460 -540 - 54% - 2010/9/20 Credit 1,000 Corporate SEA CDO limited Calyon 145 - 797 - 57 - 85% Caa3 2010/9/30 (758) Credit Corporate SONATA Calyon 1,000 398 - 611 + 9 - 60% B- 2011/3/30 Credit Momentum Limited Corporate Shinko 1,000 30 - 970 - 97% CCC- 2011/9/30 CMO1 Credit 4,000 Total 1,033 - 2,918 - 49 - 74% (3,758) 25 Copyright 2009 - Trend Micro Inc.
  • 26. Q2 forecast assumptions • Japan increases by low single digits, while US decreases by single digit and Europe decreases by double digits due to forex headwind • Stock option expenses will be 0.5Bn yen • Estimated exchange rate: 1USD = 95 yen ( last year: 105 yen) 1EUR = 125 yen ( last year: 164 yen) 26 Copyright 2009 - Trend Micro Inc.
  • 27. Projection for 2Q2009 (unaudited) For 2Q2009 Expected (in million Yen) Apr - Jun, 2009 YoY growth Net Sales 23,800 - 9% Operating Income 7,200 - 16% Ordinary Income 7,500 - 20% Net Income 4,600 + 17% (In accordance with Japan GAAP) • Including both stock option expenses and amortization of goodwill (about 787M Yen) In case of excluding a foreign exchange impact Net Sales + 2% (Non-GAAP) 27 Copyright 2009 - Trend Micro Inc.
  • 28. Appendix 28 Copyright 2009 - Trend Micro Inc.
  • 29. Appendix Quarterly Chart (1) (unaudited) (in million Yen) FY2008 FY2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net sale s 25,604 26,105 25,968 24,030 22,915 Co st o f sale s 4,054 3,859 4,188 3,646 3,597 O pe r atin g e xpe n se s 13,211 13,693 14,197 13,053 12,289 O pe r atin g in c o me 8,338 8,552 7,582 7,330 7,028 O r din ar y in c o me 7,517 9,313 9,157 7,652 7,936 Ne t in c o me 4,594 3,936 5,861 4,854 4,821 ( CO GS an d S G& A) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Go o ds 470 451 603 519 743 S allin g & Mar ke tin g 2,886 3,342 3,198 2,954 2,411 Admin ist r at io n 2,696 2,474 2,647 2,791 2,252 O u tside se r vic e 1,968 2,086 2,388 2,356 1,896 O ffic e o ve r h e ad 1,154 1,287 1,320 990 1,259 S alar y & Be n e fit 7,366 7,101 7,332 6,249 6,538 S to c k o ptio n c o st 513 513 631 601 542 Amo r tizatio n o f go o dwill 210 296 263 235 242 合計 17,266 17,552 18,385 16,699 15,886 Applie d r ate to ye n (US $ ) 104.88 104.72 107.58 96.06 93.79 Applie d r ate to ye n (Eu r o ) 157.63 163.68 161.46 126.73 121.97 29 Copyright 2009 - Trend Micro Inc.
  • 30. Appendix Quarterly Chart (2) (unaudited) (in million Yen) FY2008 FY2009 ( S ale s by r e gio n ) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Japan 9,823 9,885 9,405 9,987 9,784 US 6,178 6,570 7,098 6,344 5,953 Eu r o pe 6,185 6,551 6,137 5,016 4,748 Asia P ac ific 2,680 2,325 2,530 2,060 1,842 Lat in Ame r ic a 735 772 795 621 585 To t al 25,604 26,105 25,968 24,030 22,915 ( S ale s by se gme n t ) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 All En t e r pr ise 18,148 18,763 17,930 16,081 15,097 Co n su me r 7,455 7,341 8,037 7,948 7,817 合計 25,604 26,105 25,968 24,030 22,915 ( Bo o kin gs by r e gio n ) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Japan 11,696 11,066 10,501 10,574 12,628 US 5,226 7,625 7,104 3,907 7,358 Eu r o pe 4,608 6,920 3,416 5,385 4,584 Asia P ac ific 2,040 3,246 2,146 1,458 2,153 Lat in Ame r ic a 730 910 497 353 730 To t al 24,302 29,769 23,667 21,680 27,456 30 * “Bookings” means amount of contracts concluded. Copyright 2009 - Trend Micro Inc.
  • 31. Thank You 31 Copyright 2009 - Trend Micro Inc.

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