Trend Micro Incorporated (TMICY) Q4 2024 Earnings Call Transcript

2025-02-18 13:28:07 ET

Trend Micro Incorporated (TMICY)

Q4 2024 Earnings Conference Call

February 18, 2025 02:00 AM ET

Company Participants

Mahendra Negi - Chief Financial Officer

Eva Chen - Chief Executive Officer & Co-Founder

Kevin Simzer - Chief Operating Officer

Akihiko Omikawa - Executive Vice President Japan & Cyber Security Institute

Conference Call Participants

Hideaki Tanaka - Morgan Stanley

Hiroko Sato - Jefferies Securities

Presentation

Mahendra Negi

This is the Fourth Quarter summary. Net sales up by 8%, this is more or less as expected. Then below that we have operating income of 8.8% and 13%. This is compared to the previous quarter, it is lower. And I'm sure that we get questions about this.

And in the purple part you can see the answer, pre-GAAP numbers. So, more than JPY 100 billion in terms of our net sales up by 20% year-on-year. Pre-GAAP operating income was JPY 41.1 billion.

Now the variable revenue, so this is related to the pre-GAAP revenue as well as a profit increase. So this is the biggest factor. Pre-GAAP performance was very strong. And this is why the variable remuneration changed. So the difference between pre-GAAP and non-pre-GAAP is quite big, but I'm sure that Kevin Simzer will explain this more in detail later on.

So I would like to move on to the next part. There are some negative factors. Outside of Japan for consumer business we are outsourcing the online settlement payment. And the outsourcer Digital River in the United States had a problem with its financing funding and recovery of accounts receivable became impossible, which translated into JPY 1.7 billion. This is deducted from the pre-GAAP revenue. And without that pre-GAAP growth would have been 22%.

Now that's the pre-GAAP number, but the GAAP net sales number will be affected in this fiscal year, so impact of the non-recurable AR. And also we have switched to another vendor from Digital River, which means that renewal extension will have to be applied automatically, which means that approximately a JPY 20 million or more negative impact will be seen in the net sales, so negative growth from the previous year, and this is one of the factors behind this.

On this slide, you can see pre-GAAP profitability improvement 40%. It was at 27% one year ago. Now we are as high as 40%.

Moving on to enterprise ARR. Enterprise subscription business growing at 15%. but unfortunately perpetual renewable is down to 1% growth -- sorry, single-digit growth. Cash flow no change. Headcounts in the quarter just closed, there was a minor decrease. So at the end of 2024 we had 6,869. We had 7,400 in 2023, which means that this is a big decrease. But as I mentioned before, we're not trying to improve profitability by reducing the headcount. We are trying to increase the efficiency of the organization and introduce new technology specifically AI in order to improve productivity of each employee. This is the biggest impact....

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