Lenovo Group Ltd S/Adr

good afternoon ladies and gentlemen welcome to lenovo 2022-23 annual results investor presentation We are very thankful and happy to see you all in person and online once again. Let me introduce our management with us here today. They are Mr. Yang Yang-Chi, Chairman and CEO. Mr. Wong Wai-Ming, Executive VP and CFO. Mr. Ken Chan, Executive VP and President of Solutions and Service Group. Mr. Kurt Skelken, Executive VP and President of Infrastructure Solutions Group. Mr Lucas Rossi, Executive VP and President of Intelligent Device Group. Not least, Mr Sergio Buniak, Senior VP of Mobile Business Group and President of Motorola. Now, may I invite Yangqing to start the presentations and followed by Wei Ming on the financial performance. Yangqing, please.

Can I use this one? So for quite, hello? Can you hear me? Good.

For quite a while we haven't met our friends here in person. So hello everyone and thank you for joining us. Among all the uncertainties over the past year, the market conditions have evolved relatively in line with our expectations. Despite the challenging economy and the software device market demand, we continued to make steady progress in our service-led transformation and technology-driven innovation. For the full fiscal year, we maintained stable profitability thanks to our diversified growth engines and operational resilience. We believe that We believe that the overall PC market channel inventory digestion will come to an end, and the trends of shipment and activation will become more consistent. The entire smart device market is expected to resume growth in the second half of this year. And the IT service market will resume relatively high growth, driving the total IT market in 2023 full year back to moderate growth. In the mid to long term, digital and the intelligent transformation will continue to accelerate, leading to bigger growth potential for cloud and the entire computing infrastructure. Last year, we overcome tremendous challenges and achieved stable profitability. From a full-year point of view, our revenue was impacted due to device market softness, but thanks to our strong growth of solutions, services, and infrastructure businesses, Our net margin was keeping flat year on year on our now Hong Kong FRS basis. Non-PC revenue mix increased to nearly 40%, demonstrating the effectiveness of our efforts in building the diversified growth engines. At the same time, our cash position remains strong and we significantly improved our cash conversion cycle. With our healthy liquidity, we have been able to remain committed to our investment in R&D around the new IT to build our future competencies. And we continue to deepen our commitment to ESG. In fact, Anticipating the decline in PC and smartphone demand over the past few quarters, we proactively took actions to mitigate the risks. With our solid profitability, strong market position, resilient operations, and more importantly, reaching new milestones in our transformation from our device hardware company to our solution and service company, We are well prepared to achieve sustainable growth in the future. Now I will talk about each of our businesses. Let's start with SSG, Solution and Service Group. The new IT services segments within the trillion dollar IT service market continue to expand. By 2025, device as a service market and the cloud solution market are both expected to grow at the double digit category. Vertical solutions and the services spending will also keep a strong growth. Last year, our SSG delivered a strong revenue growth and a higher profitability to become both our growth engine and important profit contributor. Its revenue broke a record to reach 6.7 billion with operating margin standing higher at 21%. revenue mix of now hardware-driven solution and services has increased to more than half of our SSG business. Meanwhile, SSG has consistently invested in building scalable and repeatable horizontal solutions or building blocks. that can be deployed in vertical solutions or industries. Definitely leveraging our own IP. In addition, we have been continuously enhancing our digital workplace solutions and developing true scale hybrid cloud solutions portfolio. Our infrastructure solution group, or ISG, continues to benefit from the ongoing ICT infrastructure upgrade. By 2025, the server market will surpass $132 billion U.S. dollars. Storage, $36 billion. And the edge infrastructure, $7 billion. Last year, our ISG delivered a historical full-year performance and become a profitable high-growth engine. Its total revenue grows 37% year-on-year to almost 10 billion US dollars and achieved the all-time high. We also achieved a record high revenue in server, storage, and software, respectively. We have moved up from the fourth to be the third largest server provider in the world and have jumped from number eight to number five in global storage market. Meanwhile, we have been consistently improving our in-house manufacturing capabilities, cost competitiveness, as well as the full-stack product capabilities that cover both cloud service provider and enterprise SMB segments. We have also made a significant investment in infrastructure innovations empowered by artificial intelligence, such as AI powered edge computing, hybrid cloud, and intelligent operation. For our intelligent device group, or IDG, its business performance was impacted by continued device market softness and channel inventory digestion in the first half of 2023. But the given PCs are still the essential productivity tool in this digital era. So we anticipate the PC market will return to year-on-year growth in the second half of 2023. accelerated growth in 2024. Meanwhile, driven by digitalization trend and hybrid work model, smart space solutions continue to see steady growth. Faced with a severe market headwinds, IDG revenue declined year on year. but successfully maintained our PC market leadership and industry leading profitability. We increased the revenue mix of premier products to 30%. Our mobile business continues to be profitable for three consecutive years and achieved premier to market revenue growth in most of the markets. And our Smarter Spaces solution continued to demonstrate great growth potential. We will continue to take actions to manage expense and further sharpen our operational excellence in IDG. And we will keep investing in innovations, focusing on premier offerings and adjacent areas. while enhancing smart space solutions for hybrid work model. Let me also briefly cover our fourth quarter performance. It was the most challenging quarter of the year, facing pressures from both device market and the global economy. Our IDG revenue declined due to severe downturn in both PC and smartphone markets. But both SSG and ISG maintained a high double-digit year-on-year growth momentum, which helped to offset the device market softness. Last quarter, our non-PC revenue mix reached a historical high of for that 3%. Furthermore, we have recognized one-time restructuring and other charges along with various other actions to deliver about 850 million annual round rate group expense savings onwards. helping to establish a solid foundation for our operation in a challenging market and the position ourselves for future growth. Finally, I'd like to highlight Lenovo's solid performance in the face of industry downturn over the past year. We are already seeing positive signs of market stabilization. Our strategy has been proven to be working, and our operations continue to demonstrate resilience. And most importantly, even in a challenging market, we have increased rather than decreased our commitment to innovation, solutions, and services. Lenovo is now fully prepared in a strong position than ever before to capture the next wave of growth opportunity. Thank you. Now let me turn it over to our CFO.