Trend Micro Incorporated (ADR) ((TMICY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Trend Micro’s recent earnings call revealed a mixed sentiment, highlighting robust performance in operating profit and enterprise growth, while facing challenges in the consumer division and U.S. market. The company continues to innovate and strengthen strategic partnerships, although the decline in consumer sales and pre-GAAP figures remain areas of concern.
Record-Breaking Operating Profit
Trend Micro achieved a record high quarter for operating profit, with a 24% increase that surpassed internal plan metrics. This impressive performance drove the operating margin up to 22%, showcasing the company’s strong financial management and operational efficiency.
Enterprise ARR Growth
The enterprise ARR experienced double-digit growth, with recurring revenue reaching $1.3 billion. This growth was primarily driven by the large enterprise segment and the adoption of the Vision One platform, indicating a strong market position and customer trust in Trend Micro’s offerings.
Improvement in SME and UTM Sales
The domestic SME business saw a significant 22% increase in net sales, while UTM sales rose by 39% year-over-year. These figures highlight Trend Micro’s successful strategies in expanding its market share and enhancing product offerings in these segments.
Vision One Platform Adoption
The Vision One platform was adopted by over 10,600 enterprise customers, with an average of 4.8 modules deployed per customer. This adoption rate enhances customer retention and has a positive impact on ARR, underscoring the platform’s value proposition.
Strategic Alliances and Industry Recognition
Trend Micro further cemented its strategic alliance with NVIDIA and received The Partners Choice award from Canalys for its partner ecosystem efforts. These achievements reflect the company’s commitment to collaboration and its recognition in the industry.
Consumer Division Sales Decline
The consumer division experienced an 8% decline in net sales year-over-year, primarily due to issues with e-commerce platforms and fewer multiyear transactions. This decline highlights the challenges faced in the consumer market segment.
Impact of U.S. Government Budget Cuts
U.S. government budget cuts affected enterprise transactions, leading to project pauses and cancellations, which impacted the overall U.S. business. This situation underscores the external challenges Trend Micro faces in maintaining its growth trajectory.
Pre-GAAP Decline
Pre-GAAP results declined by 8%, influenced by U.S. market conditions and a high-performing Q4 pull-forward effect. This decline points to the volatility and challenges in maintaining consistent financial performance.
Forward-Looking Guidance
Looking ahead, Trend Micro reported a 2% increase in revenue and a 24% rise in operating profit for the first quarter of fiscal year 2025, with an operating margin reaching 22%. Despite a 9% decline in recurring profit due to exchange rate losses, the enterprise segment showed robust performance with a 5% increase in net sales and double-digit growth in enterprise ARR. The company remains focused on enhancing profitability and expanding its cybersecurity platform, while also implementing a flatter organizational structure and improving cost management.
In summary, Trend Micro’s earnings call reflected a balanced outlook with strong performance in operating profit and enterprise growth, tempered by challenges in the consumer division and U.S. market. The company’s strategic focus on innovation and partnerships positions it well for future growth, despite the hurdles faced in certain segments.