Lenovo Group: Third Quarter Results 2021/22
Lenovo Group (OTC-PINK:LNVGY) reported record revenue of
- Record revenue of US$20.1 billion, up 17% year-on-year.
- Net income of US$640 million, a 62% increase compared to the previous year.
- Six consecutive quarters of over 50% net income growth.
- R&D expenses up 38% year-on-year, with plans to double R&D investment in three years.
- Solutions and Services Group revenue grew 25% year-on-year to US$1.5 billion.
- None.
Lenovo delivers record quarter, as strategy and investments in innovation continue to drive sustainable profitability growth
Lenovo’s performance delivered significant year-on-year improvements. Net income grew at a rate of over
Lenovo continues to invest significantly in innovation, with R&D expenses for the quarter up
The
Financial Highlights:
|
Q3 21/22
|
Q3 20/21
|
Change
|
Group Revenue |
20,127 |
17,245 |
|
Pre-tax income |
855 |
591 |
|
Net Income (profit attributable to equity holders) |
640 |
395 |
|
|
|
|
|
Basic earnings per share (US cents) |
5.50 |
3.31 |
2.19 |
Chairman and CEO quote –
“Lenovo continued to embrace the opportunities driven by accelerated digital and intelligent transformation, and our New IT architecture prepared us well with ‘client-edge-cloud-network-intelligence’ capabilities. With another record quarter, we delivered the 6th quarter of more than
Opportunity:
Q3 performance:
-
Significant Q3 revenue growth (
25% year-on-year toUS ), delivering$1.5 billion 7.1% of overall Group revenue and with an operating margin of over22% , a nearly three-point increase year-on-year. -
Support services saw revenue growth of
21% year-on-year. -
Managed Services saw revenue improve
50% year-on-year, driven by Lenovo TruScale as-a-Service offerings announced last quarter. Breakthroughs in Smart Retail helped Project Services and Solutions achieve revenue growth of23% year-on-year.
Looking ahead:
- Lenovo will continue to seize the sizeable market opportunity to drive both revenue growth and higher profitability. This starts with the growth in remote workers, where Lenovo will leverage its global service footprint to help transform worker productivity through premier support, as-a-Service, and digital workplace solutions.
- In managed services, Lenovo will continue to invest in Lenovo TruScale offerings, hybrid cloud solutions and additional software and services based on the company’s own IP.
- The company will also further expand sustainability solutions for customers, such as its asset recovery service and the recent expansion of its carbon offset service.
Infrastructure Solutions Group (ISG): reaching profitability, growing at a strong premium to market
Opportunity:
Opportunities continue to grow for ISG as ICT infrastructure modernization expands around the world. The ICT infrastructure market is expected to become a
Q3 performance:
-
ISG delivered record performance, reaching the milestone of achieving profitability for the first time since the IBM x86 acquisition in 2014. Revenue grew
19% year-on-year to reachUS . This was the fourth straight quarter that revenue grew at a double-digit premium to the market.$1.9 billion -
The business outgrew the market in nearly every segment. Cloud Service Provider revenue grew
38% growth year-on-year; Enterprise/SMB revenue improved7% year-on-year.
Looking ahead:
- Lenovo will leverage its coverage of all customer segments (CSP of different scale, Enterprise, SMB) as a unique advantage to balance scale and profitability, as well as customers’ demands for security/reliability and agility/flexibility.
- Investments will continue to be made in fast-growing and expanding segments such as Edge computing.
Opportunity:
The market for smart devices continues to benefit from the new normal of hybrid working and the PC market is forecasted to remain strong and stable, shifting to commercial and premium segments. In smartphones, the market reshuffling will bring more growth opportunities to Lenovo, and the penetration of 5G and development of the New IT of ”edge-cloud-network-intelligence” will provide more growth potential for emerging smart devices such as embedded computing/IoT, AR/VR driven by the metaverse, as well as smart home and smart collaboration solutions.
Q3 performance:
-
Excellent results with revenue growth of
16% year-on-year toUS , with even stronger profitability growth - up$17.6 billion 21% year-on-year toUS , on an already high base.$1.4 billion -
Premium PC segments delivered high growth with workstation and gaming revenue growing
40% and27% year-on-year, respectively. -
Smartphones maintained a healthy profit for the seventh consecutive quarter, with revenue growing strongly at
46% year-on-year and becoming the fastest growing major vendor. Profit equaled the historic high of last quarter atUS . Rapid growth was seen in key strongholds, with revenue in$89 million Latin America up25% year-on-year and revenue inNorth America more than doubling year-on-year (133% ). - Among the emerging smart devices categories, revenue from smart collaboration solutions nearly doubled year-on-year.
Looking ahead:
-
Lenovo will further invest in innovation, premium segments, and core components to drive increased profitability and average selling price. In Mobile, we will further strengthen our portfolio and invest in expanding to new markets in
Europe andAsia Pacific . We also will continue to invest in non-PC products such IoT, metaverse, smart Home and smart collaboration solutions to capture emerging opportunities and further increase the non-PC business mix.
Operational highlights and investing for the future
-
Lenovo continues to focus significantly on ESG through all its operations – from the use of innovative recycled materials in products such as the ThinkPad Z series launched in
January 2022 , to the use of carbon neutral flights for cargo shipments. -
In addition, Lenovo has recently received significant external recognition for its ESG actions and commitments, including:
-
Recognized as one of the world’s most sustainable companies by
Corporate Knights - Secured a place on the prestigious ‘A List’ for tackling water security by global environmental non-profit CDP
- Earned a perfect score of 100 on the 2022 Corporate Equality Index
- Recognized on the Bloomberg Gender Equality Index
-
Named as one of the
Financial Times 2022 leaders in diversity - Climbed the 2022 list of Fortune’s Most Admired Companies
- Awarded gold in the Hong Kong Institute of Certified Public Accountants Best Corporate Governance and ESG Awards 2021
-
Recognized as one of the world’s most sustainable companies by
About Lenovo
Lenovo (HKSE: 992) (ADR: LNVGY) is a
FINANCIAL SUMMARY
For the quarter ended (in US$ millions, except per share data) |
||||
|
|
|
|
|
Revenue |
|
20,127 |
17,245 |
|
Gross profit |
|
3,355 |
2,786 |
|
Gross profit margin |
|
|
|
0.5 pts |
Operating expenses |
|
(2,423) |
(2,085) |
|
R&D expenses |
|
(549) |
(398) |
|
(included in operating expenses) |
|
|
|
|
Expenses-to-revenue ratio |
|
|
|
(0.1) pts |
Operating profit |
|
932 |
701 |
|
Other non-operating income/(expenses) - net |
|
(77) |
(110) |
(30)% |
Pre-tax income |
|
855 |
591 |
|
Taxation |
|
(173) |
(160) |
|
Profit for the period |
|
682 |
431 |
|
Non-controlling interests |
|
(42) |
(36) |
|
Profit attributable to equity holders |
|
640 |
395 |
|
EPS (US cents) |
|
|
|
|
Basic |
5.50 |
3.31 |
2.19 |
|
Diluted |
4.92 |
3.08 |
1.84 |
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