Renesas Electronics Corp

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Thank you very much, ladies and gentlemen, for taking your precious time to attend Lunasus Electronics' fourth quarter of fiscal 2021 results presentation. Today, simultaneous translation is available. If you look at the globe button on the screen, at the bottom of the screen, please select your language from that button. For today's presentation, we have the CEO of the company, Mr. Hidetoshi Shibata, our CFO, Mr. Shuhei Shinkai, and the head of our automotive solution business unit, Mr. Takeshi Kataoka, and other staff are also present. From now on, Our CEO, Mr. Shibata, will say a few words, and after that, our CFO, Mr. Shinkai, will give you an explanation regarding the results for the fourth quarter, and then after that, we'll take questions from the participants. We expect to finish the whole session in about 60 minutes. The presentation materials to be used for today's meeting are posted on the IR website of Lunasat Electronics. Please turn on your microphone, Mr. Shibata and Billigan. Once again, hello, this is Shibata, CEO of the company. Last year, we had a fire. And to summarize that, and also the progress of our mid to long-term business and strategy, is what we explained in the progress update, which is held biannually, and that is the next session is scheduled for next month. So for today, we would like to focus on the full year results for fiscal 2021, which ended in December 2021. Now, many of you, I believe, have already seen the presentation. On a non-GAAP basis, revenue was slightly below 1 trillion yen and operating profit was slightly over 300 billion yen. So that was the number for last fiscal year. And the demand continues to be strong and robust. And we see that sign continuing. And for fiscal 2022, in the first quarter, quite a favourable And the steady expansion is projected for the first quarter and the numbers are already presented there. So with that, on an ongoing basis, the situation remains not really bad at all for us. And all those questions that we have been receiving from you regarding at which point we'll see an inflection of demand, we will continue to carefully keep an eye on that And if we see any signs of changes, we will be ready to take actions as necessary. That's going to be the plan for this year. So the detailed numbers will be explained by Mr. Shinkai, our CFO. So please bear with us. Shinkai-san, please, the floor is yours. All right. I am Shinkai, the CFO. I would now like to begin the fourth quarter and the four-year results presentation for the fiscal year ended December 2021. Based on the material posted on our IR website, please go on to page four of the presentation. For the fourth quarter, if you look at the middle dark column in the middle of the table, revenue was 314.4 billion yen. Growth margin was 54.3%. Operating profit margin was 98.7 billion, and the profit margin was 31.4 billion yen. And the profit added to the owners of Perim was 80.9 billion, and Evita was 119.4 billion yen. As for the comparison with the forecast, if you look at the third column from – if you look at the far right column, I think you can refer to that, and I'll give you some explanation later. And also for the full year, numbers are presented on the next dark column, third from the right. And also – Celino's acquisition, which was just completed in the end of the fourth quarter, that's not included in the PL. Only the BES that is consolidated for fiscal 2021. That's the accounting treatment for that acquisition. The next page, please. This is the revenue trend on a quarterly basis. The fourth quarter is represented on the far right. Overall, the revenues or the we achieved an increase of 61.4% year-on-year and 21.7% on a quarter-on-quarter basis. If we exclude dialogue on a year-on-year basis, 34% and 8.0% on a Q-on-Q. And as for automotive and industrial infrastructure and IoT business, the numbers are presented already here. And if we exclude the dialogue contribution, Automotive year-on-year was a 37% increase. And Q&Q, 8.1%. And industrial IoT and infrastructure year-on-year, 38.9%. And on a Q&Q, 9.1% increase. Now moving to page six. The fourth quarter, operating margin, gross margin, operating margin, and the revenues are summarized here. We have presented it together with the segment results, the company total on the far right. Let me begin with that. The box on the upper right shows the changes from the forecast. As for revenue, there was a 5.5%. In terms of the median level, there was an increase of 11 billion yen. The Forex impact was about 40%, and also the remainder came from the changes from the automotive and in the industrial infrastructure and IoT business. For automotive, if the Forex impact is excluded, there was a slight underperformance compared to the forecast because there was some adjustment from the customer demand towards the end of the year. As for industrial infrastructure and IoT, there was a significant increase compared to the forecast. PC and mobile related demands and also the former Dialogue products, there was a strong demand for them. So we were able to front load and ship those products that were completed before in advance. And there will be some adjustments in the quarter, this current quarter. And as for the gross margin, 1.3% increase compared to the forecast. And the product mix, as well as the production recovery, were the major driver behind this improvement. And 80% was the contribution for this. And also for the operating expenses, there was a decrease compared to the forecast. R&D, SDNA, on the same proportion, made a reduction compared to the forecast. We achieved a reduction compared to the forecast. And on a quarter-and-quarter basis, bottom right, In terms of the gross margin, there was a reduction of 0.9 percentage point, and this is mainly due to the consolidation of dialogue. That impact accounts for the bulk of this. And also, if you look at the segment that results on the right-hand side, as for the revenues, the breakdown was already provided to you earlier. As for the gross margin and also operating margin, for industrial infrastructure and IoT, Q&Q, if you look at the numbers for Q&Q, you see that there are some changes there, and that's mostly due to the consolidation impact from dialogue. Page 7, please. This is the in-house inventory trends. On the far right, if you look at that company total, the DOI overall, on a Q&Q basis, we achieved a reduction, but if you look at the left-hand side, there was a slight increase in automotive and a reduction in industrial and infrastructure IoT business. So overall, in terms of actual amount, there was an increase, and this is due mainly to the PPA impact from dialogue and the addition of Celeno. If you exclude those impacts, there are three major impacts because of the front-loading of some inventory, including both work-in-progress as well as finished goods, and also for the back end production increasing than forecast and also for finished goods. For automotive, as I mentioned earlier, the timing difference. Because of the timing, there are some back orders. That was the impact. So therefore, both for work in progress and also for finished goods, as we mentioned in the last, compared to the last presentation, there was a slight increase in the inventory level that we hold in-house. And this is the sales channel inventory. The far right shows, again, the company total. And just for your information, for the channel inventory, the dialogue portion is not included here. And we'll try to include the numbers after completing the integration in the first half of this year. The company total, WOI, on a Q and Q basis, achieved a reduction. And if you look at the segment results on the left-hand side, automotive, compared to the initial assumption, there was a slight increase. This is due to the OEM production adjustments. As for industrial infrastructure and IoT, there was a reduction compared to our initial expectation due to the decrease in inventory and also the changes in demand. Those were the two factors behind this decrease in WI. If you look at the actual amount, the inventory may look as though this is flat or slight increase, but In some transactions, in some trade flows, because of SHIB and debit in the actual amount, there seems to be a slight increase. And SHIB and debit introduction will be continued on an incessant basis going forward. So if you look at the actual amount, there might be some times where we see a slight increase in the inventory actual amount. Now moving on to the next page. which is about the utilization rate for the front end on an input basis. Fourth quarter utilization rate was almost came in in line with our expectation at 84%. On a Q&Q, there was a slight decrease due to the number of actual days of operation.

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