The following is a summary of the Trend Micro Incorporated (TMICY) Q4 2024 Earnings Call Transcript:

Financial Performance:

• Trend Micro reported a 20% year-on-year increase in pre-GAAP net sales, achieving over JPY 100 billion, with a substantial part of revenue growth attributed to the increase in pre-GAAP operating income, which reached JPY 41.1 billion.

• The company saw variable revenue growth tied to pre-GAAP performance as a significant factor.

• Q4 experienced the highest ever pre-GAAP organic growth without the influence of acquisitions, indicating robust organic business strength.

• FY 2024 concluded with the highest ever net revenue and operating income reported by the company.

• Despite a challenging backdrop due to an online payment issue with Digital River, impacting sales by approximately JPY 20 million, corrective actions and switch to a new vendor were implemented to mitigate further impacts.

Business Progress:

• Trend Micro highlighted significant strides in enterprise ARR, with subscription business growing by 15%.

• Notable advancements were made in AI incorporation to enhance productivity and operational efficiency across the company.

• The AI democratization and proactive cybersecurity initiatives were emphasized as key strategic pivots to address current and future cybersecurity challenges.

• Proactive investments in AI and strategic partnerships, like the one with NVIDIA, were stressed as crucial to supporting ongoing and future business needs.

Opportunities:

• The company anticipates continued upward trajectory in revenues, driven by persistent strength in enterprise revenue growth and geographic expansion into new markets, foreseeing a 10% growth in EMEA and Asia.

• The democratization of AI as described by Eva Chen presents an opportunity for the company to lead in innovative, cost-efficient, and accessible AI-driven security solutions.

• The shift towards proactive cybersecurity, enabled by AI democratization, offers a strategic advantage in evolving the cybersecurity solutions landscape.

Risks:

• Operational disruptions stemming from the financial instability of the payment outsourcer Digital River, leading to a loss of JPY 1.7 billion.

• The company faces challenges in the consumer business sector, particularly in Japan, where the PC business continues to struggle, creating negative pressure on consumer business growth.

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