Whom You Know: LENOVO DRIVES STRONG FOURTH QUARTER AND FY2017/2018 RESULTS; INNOVATION AND EFFICIENCIES POWER CONTINUED FY2018/2019 IMPROVEMENT

Tuesday, June 19, 2018

LENOVO DRIVES STRONG FOURTH QUARTER AND FY2017/2018 RESULTS; INNOVATION AND EFFICIENCIES POWER CONTINUED FY2018/2019 IMPROVEMENT

Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced results for its fourth fiscal quarter and full fiscal year ended March 31, 2018. For its fourth fiscal quarter FY2017/18, Lenovo reported US$10.6 billion in revenue, up 11% year-on-year - the first double digit increase in 10 quarters - demonstrating solid performance momentum.

In the fourth fiscal quarter Lenovo’s group pre-tax income was US$37 million, up 143% year-on-year from US$15 million. The company also improved profitability in all three key businesses for the quarter year-on-year, with group operational performance[1] improving US$255 million year-on-year to US$76 million. Profit attributable to shareholders for Q4 was US$33 million, lower than the same period last year due to a larger tax credit recorded in FY2016/17.

For the full fiscal year, the company’s overall revenue was over US$45.3 billion, up 5 % year-on-year. Group operational performance reached US$193 million, improving US$96 million year-on-year. The company recorded a US$189 million net loss for the full year mainly due to a one-time non-cash write-off charge of US$400 million from deferred income tax assets in Q3 FY2017/18.

Basic earnings per share in the fourth fiscal quarter was 0.28 US cents or 2.19 HK cents, and for the full year basic loss per share was 1.67 US cents or 13.05 HK cents. Lenovo’s Board of Directors declared a dividend of 2.61 US cents, or 20.5 HK cents per share for the fiscal year ended March 31, 2018.

Business Group Overview

Lenovo continued to execute on its three-wave strategy, emphasizing leadership in core businesses, growth in key segments and investment in emerging technologies. All three of Lenovo’s key business groups demonstrated strength and momentum in both the fourth quarter and fiscal year

Personal Computers and Smart Devices (PCSD) reported US$7.7 billion in FYQ4 revenue, up 16% from the same period a year earlier and the highest growth in four years. For the year, PCSD reported US$32.4 billion, up 8% from FY2016/17

The Data Center Group (DCG) revenue grew 44% during the quarter compared to Q4 FY2016/17 to US$1.2 billion. For the year, DCG reported US$4.4 billion in revenue, up 8% from FY2016/17

The Mobile Business Group (MBG) revenue for Q4 FY2017/18 was US$1.3 billion and for the full year was US$7.2 billion. Lenovo remains optimistic that aggressive cost-cutting and exceptionally strong performances by MBG in Latin America (volume grew 40% year-on-year for the full year), or more than 20 times the industry) and North America (volume +57% year-on-year for the full year) are expected to yield substantially improved results as FY2018/19 continues

“Last quarter, we resumed double-digit revenue growth with strong profitability improvement year-on-year, closing the fiscal year with a strong momentum and proving that Lenovo has truly entered a new phase of growth,” said Yang Yuanqing, Lenovo Chairman and CEO.

“Lenovo’s vision has long been to become a global leader in intelligent transformation. We will focus on building competitiveness in Smart IoT devices, data center infrastructure and vertical intelligent solution, and we are well positioned to take advantage of smart IoT and intelligence era.”

During the quarter Lenovo also announced the integration of its Personal Computer and Smart Devices Group with its Mobile Business Group, creating the Intelligent Devices Group (IDG). This new group will further fast-track the company’s innovation leadership and ambitions for growth across the full spectrum of smart devices. This new structure will create a number of efficiencies by leveraging shared global supply chain and services. IDG will also accelerate Lenovo innovation as communications and computing technologies come together under a single platform to better connect devices, users, applications and content.

ADDITIONAL BUSINESS GROUP HIGHLIGHTS

PC and Smart Devices (PCSD) business group: During the fourth quarter, PCSD posted strong revenue growth of 16% compared to the same period a year earlier. For the year, PCSD reported an 8% increase in revenue, and remained the world’s #1 PC and Tablet maker[2], with market share growing 0.2 points to 15.6% globally. Additionally:

Returned to industry-leading PTI margin of 5% in Q4 FY2017/18. All geographies continued to be profitable with margin expansion in four out of five

Strong, double-digit, year-on-year revenue growth across regions in the Americas, Asia Pacific, and EMEA

Focused strategy in high-growth segments paying off with strong double-digit shipment growth year-on-year in both Gaming (+42%) and Workstation (+32%) in FYQ4. Both surpassed the US$1 billion-dollar scale in FY2017/18 with gaming reporting double-digit revenue growth year-on-year

Named Best Laptop Brand 2018 by LAPTOP Magazine for a second consecutive year

Data Center Group (DCG): The Data Center group is well positioned to provide the infrastructure for the smart IoT era and continues to be a significant growth business for Lenovo. The group’s financial performance serves as a tangible proof point that the DCG strategy is yielding significant results:

In Q4 FY2017/18 delivered second consecutive quarter of double-digit year-on-year growth and achieved highest revenue growth (+44%) since the IBM System x acquisition in 2014 – with all geographies showing positive year-on-year revenue growth

North America and EMEA posted their fourth consecutive quarter of strong year-on-year revenue growth

Software Defined Infrastructure (SDI) continued strong revenue growth - 130% year-on-year

HPC solidified the number two position globally in the top 500 Supercomputing list, fast closing the gap to number one player

Mobile Business Group (MBG): During the quarter MBG moved with urgency to reshape the business for future growth and to accelerate progress toward profitability. This included the appointment of Sergio Buniac to lead the business outside of China; a realignment of the product portfolio ahead of forthcoming launches; overall channel inventory reduction, and a strategic market review to identify the opportunities for most profitable growth.

In Q4 FY2017/18 Latin America remained the strong core for MBG, recording double-digit (13%) year-on-year revenue growth

In North America, shipments continued to show strong, year-on-year growth as Lenovo strengthened presence with mainstream models and carrier expansion. North America shipments grew 54% year-on-year for Q4 and gained 1.1pts of market share to 3.8% in Q4 FY2017/18

Expense reduction for the new fiscal year as part of a strategy to reduce loss and focus on strengthening MBG’s leading position and profitability in Latin America, North America and Western Europe by simplifying the portfolio, optimizing the cost structure and leveraging shared platforms

Lenovo Capital and Incubator Group: Lenovo continues to be a beneficiary and driver of some of the most robust trends in global technology innovation, notably artificial intelligence. Lenovo’s investment arm, Lenovo Capital and Incubator Group (LCIG), funded 85 companies during the past years, and oversaw eight independent spin-offs.

About Lenovo

Lenovo (HKSE: 992) (ADR: LNVGY) is a US$45 billion Fortune 500 company with a vision to become the global leader in Intelligent Transformation through smart devices and infrastructure that create the best user experience. Lenovo manufactures one of the world’s widest portfolio of connected products, including smartphones (Motorola), tablets, PCs (Thinkpad, Yoga, Lenovo Legion) and workstations as well as AR/VR devices and smart home/office solutions. Lenovo’s next generation data center solutions (ThinkSystem, ThinkAgile) are creating the capacity and computing power for the connections that are changing business and society. Lenovo works to inspire the different in everyone and build a smarter future where everyone thrives. Follow us on LinkedIn, Facebook, Twitter, Instagram, Weibo, or visit us at http://www.lenovo.com/

[1] Operational performance is measured as profit before taxation, but excluding restructuring charges and disposal gains on properties

[2] Source: IDC Quarterly Personal Computing Device Tracker, 2018Q1 Final Historical

Recent Testimonials by Brand Ambassadors on their Experience with Whom You Know

"I work with Peachy Deegan because she's prolific at what she does. She's a hard worker, she's thoughtful and she's tasteful at what she writes which is very important. Peachy gets the facts correct, and just that alone is worth its weight in gold."

-Edward Tricomi, Master Stylist and Owner of Warren-Tricomi
https://warrentricomi.com/

"No one has yet to express their taste for our cuisine better than Peachy Deegan on Whom You Know. Thank you for transforming our flavor into words, unlike any other before.
Sometimes WHOM YOU KNOW, really makes a difference and Ammos Estiatorio is grateful to know Peachy Deegan!"
-
Dimitris Nakos, Founder and Owner of
Ammos Estiatorio
https://ammosnewyork.com/

“Whom You Know has done an amazing job of featuring our company over many years [seven]. Peachy has worked tirelessly to create a well-curated selection of topics and brands that are clearly of relevance to her growing audience of readers. Her articles are filled with great insights based on first-hand experience. She does her research, knows her business and is a pleasure to work with!”

-David Sasuga, Owner of Fresh Origins Microgreens
www.FreshOrigins.com

"Peachy Deegan has the pulse of the nation and highlights exceptional opinion leaders in more than 23,000 inspiring and entertaining posts. Her 100,000 twitter followers are a true testimony to Peachy’s ability to inspire, motivate and entertain. She is a feminine force to be reckoned with and an exemplary example of an influential voice in today’s world."

-Mica Mosbacher, author of the new book The Hurricane Factor: Stormside Patriots and tv political commentator

"It was an honour to be chosen for Movers and Shakers by Peachy Deegan. The questions in the interview were intelligent and insightful and I thoroughly enjoyed answering them. The reaction to the interview has been overwhelmingly positive and has helped bring my art practice to a wider audience."
-Damien Flood, Internationally Acclaimed Artist
http://www.damienflood.ie/

"We were so fortunate to hit Peachy’s radar. Her review of our Warmies was spot-on and came at a great time in our company’s early history.
Peachy has such a strong relationship with her readers. She provides honest and real comments; she is truly a trusted source in a very large circle
of consumers."
-Scott Wehrs
President
Intelex U.S.A.
http://www.intelexusallc.com/

"We at Primola love working with Whom You Know and are proud to have been a highly-ranked Manhattan restaurant by Peachy Deegan since 2012, and are featured seasonally. We appreciate the fantastic work Peachy does highlighting our cuisine with her sublime writing style and the whole neighborhood of the Upper East side. Also, we are glad that she has started a Made in Italy column! If you have the opportunity to be considered for review, we'd highly recommend working with her."
-Giuliano Zuliani, Owner of Primola Restaurant
https://www.facebook.com/Primola-Canaletto-restaurants-NYC-135616799831091

"
Peachy Deegan is a gem. She is wonderful to feature our Irish brands in 'Whom You Know'! The articles are beautifully and passionately presented, bringing products and brands to life, making both relevant and fun for her many faithful followers to read. I am immensely proud for our hand-crafted products to be included in this venue!"

-
Bill Follett
President, Belleek Group North America
www.Belleek.com

"As you know from my past features, Peachy Deegan and I were in the same class at Boston College prior to either of us becoming entrepreneurs. When we played together on the BC Alumni softball team in Central Park years ago, she mentioned she could not find a great dentist in Manhattan and could often be found networking on her phone in the outfield hiding from the ball. She was my second patient ever in 2006 when I opened my dental practice; I was one of the first sponsors on Whom You Know and the first Mover and Shaker featured in 2009 and have worked with her continuously since. She's even talked her friends that are doctors into being my patients, and they subsequently send their hospital colleagues. I don't know anyone that is as great of a networker and writer as Peachy, nevermind that she is upstanding and always good for her word. Cosmopolitan Dental is so happy to be in the company of the caliber of major brands she works with today, and although she will tell you a million ways to get your teeth dirty between Peachy's Picks, Terrific Takeout and Peachy's Pantry, Peachy Deegan will tell you there is only one way to get your teeth clean!"
-Dr. Garo Nazarian, Founder and Owner of Cosmopolitan Dental
http://cosmopolitandental.com/