Softbank Group Corp

Thank you very much for waiting, everyone. Now we would like to start the SoftBank Group Co-op Earnings Results Announcement for the fiscal year ended March 31st, 2024. First, I would like to introduce today's participants. From left, we have Yoshimitsu Goto, Board Director, NCFO. Kazuko Kimiwada, Corporate Officer, Senior Vice President and Head of Accounting. Navneet Govel, CFO, SB Investment Advisors and SB Global Advisor. Jason Child, Executive Vice President and CFO, ARM. Today's announcement is live broadcast over the Internet. Now I would like to invite Yoshimitsu Goto to present you the earnings results and business overview. Thank you for the introduction. My name is Goto, SoftBank Group. Thank you very much for your time today. This is fiscal year-end earnings. So this is a kind of a summary for the one whole year. And at the same time, I'd like to share our ideas for the future as much as I can for today. So looking back one year, I believe the biggest event in our company was, of course, IPO of Arm. Last year, September, Arm went public, and I believe that was one of the biggest sides of the IPO. And you can see in the middle, Jason is also in person attending today's meeting. Arm share price, it was IPO price $51 as of the end of March. went to about $125. So compared to the IPO price, it is now 2.5 times. Of course, after then, January and February, there are some ups and downs. And last week was about $108. So I believe it was a good share price, good performance. So net asset value is hitting near record highs with arms share price surge. So I believe arms contribution was one of the biggest contribution to the share price or the net asset value as well. So here I would like to share with you the kind of history with our net asset value. So starting from 1998, I joined SoftBank was year 2000, so almost the same history of mine in SoftBank Group and NetAssetValues history here. And first, around year 2000, the highlights of the asset was Yahoo Japan back then. Later 90s, Masa start having a good relationship with Jerry Yang and also Mr. Inoue. Very unfortunately that Mr. Inoue passed away a few years ago, but these are the members, the core members, and who made a big kind of attention from the market by creating and founding Yahoo Japan. And then SoftBank Group started mobile phone operations with the acquisition of Vodafone KK that SoftBank also started the mobile phone operation. And also we entered into a U.S. market by acquiring Sprint. And after then, that Sprint was merged with T-Mobile. So SoftBank KK and T-Mobile here Those two are the mobile phone infrastructure company, so I believe this is a very high-liquid asset and very high-quality asset from an assets point of view. And, of course, Alibaba. Year 2000, when I joined SoftBank Group, the first guest that I met from overseas was Mr. Jack Ma. Back then, revenue was zero. And the master decided to invest in 3 billion yen. And I was so surprised because I used to be a banker. But after then, Alibaba made a great contribution to the group. Of course, share of Alibaba, economically, we have already monetized. However... I believe, relationship between Jack and Masa, and also the intra-group relationship still continues. Vision Fund started after then, and now that we are growing, obviously, Portfolio Company of... 500 companies. We will touch on Vision Fund also, but now that the IPO companies are more than 50 now, so I believe this is quite a good size that we have been able to grow the Vision Fund business. As I mentioned in the very first page, we acquired this company back in 2016. We spent about 3 trillion yen, level of the acquisition cost. And back then, market analysts criticized us spending so much money. But actually, look at now, having Arm in our group company now. And nobody doubts about the capabilities or the abilities for the technologies or the services of one providing. So with that, we've been able to grow our net asset value. So we are making big changes here and there. I would say very bold changes here and there. And it is risky. That's another question that people may ask. Actually, I have a different view on the risk because our risk is not changing. Changing is the biggest risk hedge that our company can do, and that's the management we would like to follow. So as an investment company, I believe now that we became a very unique position and also try to kind of show our value to the market. As of the end of March, our net asset value is 27.8 trillion yen. In the morning, this today was about 26 trillion yen or so. So that's a kind of asset which is the highest ever. And also, we would like to keep this growth continuously. One of the biggest drivers is, of course, the arm for the net asset value growth. And if you look at this pie chart, Back in 2016, when we acquired ARM, tablet, smartphone, those mobile devices or digital devices was already dominantly ARM is provided. So many people have an impression that the Army is mainly focused on mobile or market or mobile segment. However, now when you look at their revenue proportion, they have diversified very well. So mobile was dominant back then, but now mobile is less than 50% in terms of relative revenue proportion. But of course, the revenue for the mobile is 1.5 times since 2016, so... While revenue is increasing, but at the same time, other sector is also growing as a result. So cloud, automotive, IoT, so those other sector in addition to that. Even in other sectors that actually ARM is making a good growth. And if you see the revenue starting from 1.5 to 3.2, so it's very much doubled. And arm-based ship shipped is about 1.9 times, almost double again here. And personnel or headcounts, 1.7 times. So revenue, shipments, and also the engineers as a company has been doubled in growth. So those are the fact bases. And for the future outlook, how do you see? And here, recently announced that their earnings results announcement also provided the guidance for first quarter fiscal 2024 of revenue is expected between 30% to 37% increase. And for the full year basis for fiscal 2024, revenue is expected to increase by 18% to 27%. So here we have Jason on our stage, including others like Kimi Wada and Navneet. We are all finance people. We are basically conservative people here on the stage and based on that conservative view. But at the same time, we do every effort to be able to achieve the upside at the same time. And also, I'd like to share with you some numbers for the consolidated results.

First, consolidated results for FY2023. Net sales was over 6 trillion yen. And you see the numbers gain in loss on investment, income before income tax, net income. Net income for FY2023, actually, in net loss, was recorded 227. For us, it was not big. But if you look at the change from the last year, net income improved by $742 billion. So compared to FY22, we have made good progress. I think the good progress is well shown in the quarterly results from quarter one through quarter four. Quarter four net income was $231 billion. Income before income tax was negative $206 because mainly due to reversal of deferred tax liabilities. In any case, for quarter three and quarter four, we coded plus numbers in terms of net income. Impact of changes in arms share price. IPO was a huge event, as I mentioned earlier. So just to remind you, impacts of the IPO, from the perspective of Consolidated PL, Changes in the stock values are not recorded because we have over 90% of ARM. It means ARM is our subsidiary. But in terms of net asset value or NAV, of course, value is reflected. The number of shares held times share price is reflected here. Gain or loss on investments and net income on quarterly basis is shown here. As I mentioned earlier, for the two consecutive quarters, we recorded a net profit. And the orange line shows gain or loss on investments. Of course, it goes ups and downs. But in general... It's been stabilized, and we want to have this trend on the positive side going forward. Gain or loss on investments. Orange is investment business of holding companies, whereas blue indicates SoftBank Vision Fund. As you can see, FY 2022, they recorded... over 5 trillion, and it improved to 167 billion, which was a huge improvement over the last year. And investment business of holding companies in orange reflect Alibaba. So again, the message here is a huge improvement of SoftBank Vision Fund. On quarterly basis, rather than annual basis. For the whole year, we demonstrated an improvement trend, especially SVF. Now talking about key indicators, three important KPIs. First, net asset value or NAV. As of March end, it's almost $28 trillion and doubles in the last year. Loan-to-value, or LTV, the smaller the number is, the better. As of the end of March, 8.4%, whereas 11% as of March 2023. So we have shown improvement over... three percentage point. Cash position decreased a little bit, but I believe that this is contributing to bigger net asset value. And if you can see the change in net asset value on the waterfall chart, a main driver of the increase includes increased value which is about 10.8 trillion, and Forex. Most of our assets are U.S. dollar denominated, so because of the weaker EEM, from net asset value perspective, we are enjoying positive numbers in terms of Forex. Our foreign exchange is not out of our control, And the 3.3 is not bad or good. It's just a fact of the market condition. Going forward, it's likely that we will make an investment in dollar terms. So we are not really focusing too much on hedging, but a more important thing is to communicate well with you how much impact is reflected on our net asset value in terms of Forex. Now talking about Forex, from the perspective of NAV and accounting, on NAV, Japanese yen increased NAV by 3.3 trillion. On accounting basis, especially when it comes to consolidated net income, weaker yen decreased net income by 0.7 trillion, whereas increased equity by 2 trillion. The yen was weaker from 133 one year ago to 151. That was the impact of Forex. Now, loan-to-value, which is an indicator of our safety net, if you will. LTV currently is 8.4%. It's almost record low from our company's perspective. On quarterly basis, as you can see on this chart, generally speaking, it's been improving. And the cash position is plenty. And we have capacity to try a lot of new things. But I'll talk about that later. about our financial policy and financial disciplines. So we want to strike a balance between safety and growth. Cash position, as I mentioned earlier, we have maintained a high level, which is around 4.7 trillion in fourth quarter. This chart shows change in composition of asset held. As you can imagine from the history of net asset value in 2020, when we had a lot of Alibaba shares on our balance sheet, Alibaba accounted for 48% in our assets held. Now, economically prospective, Alibaba is almost zero. Instead, we have ARM over 45%. Not only ARM, but Vision Fund percentage increased from 11% in 2020 to 29% in 2024. This change is not simply transformation of the portfolio not just simply shifting from Alibaba to someone else rather it shows shift to AI centric portfolio ARM is core of our AI shift and assets held by us and SoftBank Vision Fund are also AI centric. So ARM and portfolio companies should create a new ecosystem going forward. That's our view and that's our expectation. And that is reflected in this portfolio. As I mentioned at the beginning of presentation, keep changing is the biggest or most important risk hedge. Talking about risk, regional competition is something that we need to look at as well because of recent geopolitical situation. So China-centric risk, as you can see, has been mitigated since 2020. investment in China was over 50% in 2020. And now majority is Europe, Middle East and Africa. We have shown several pie charts so far. And now let me talk about the quality of assets. I think there's a big difference between unlisted shares and listed shares. Because for the listed shares, the values are clear in the market and liquidity is high. And credit agencies' perspective and the rating agencies' perspective, I think those aspects are very important. When we were downgraded by the rating agency, it was mainly because we didn't have a lot of listed companies. But now we have over 75% or 79% of listed companies in our portfolio. JCR, for example, in the Japanese rating agency, raised our rating. So I believe that this should improve credit.

Here on investment strategy. Masa, in the past few years, once in a while he comes to the public and talks about AGI. you may recall, this stands for Artificial General Intellectuals. And this is 10 times of the human intellectual, and that can be achieved within 10 years. That's Masa mentioned at his keynote speech of the SoftBank World last year. And after then, in 20 years, so in addition to this 10-year of AGI, 10,000 times of the human intelligence will be available. So-called artificial super intelligence will be available. That's the kind of big picture we have as a forecast. And right now, We've been utilizing chart GPT and so on to see our hypothesis for the future of AI. And with that, how can we support the changes of the business or changes of the service? CEO of ARM, René, also made a speech at the CES 2004, and he said, AI is everywhere. You can't run AI without ARM, and I believe that has been well accepted. ARM, as you know, it has a great market share in terms of the design of chips. So they are the very beginning of the upstream of the supply chain of a semiconductor, and that is for my understanding. And when you look at the direction of the AI for the future, there are many issues that we need to solve. For example, completely... different scale of the computing power is going to be necessary. Data center is going to be necessary. And if you look at this size, annual electricity consumption of data centers worldwide was 460 telewatts. And actually, if you compare with the consumption in UK and electricity, it is already exceeding. And how are we going to solve this kind of issue is something that we need to address. One thing, of course, generating power for running the data center is important, but also you can see a different aspect, which is the energy efficiency, which ARM is very good at. And here are three examples. For example, Amazon, Microsoft, Oracle. They are actually... using ARM-based IP for their products. So as a result, Amazon, for example, AWS Graviton is 60% more efficient than competition or competitors, or Microsoft Azure Cobalt is 40% more efficient, Oracle 60% more efficient. So for them, this is very valuable technology that ARM is providing now. NVIDIA also using ARM-based chip for their data center chip. So ARM NeoBurst v2 core is deployed, and they've been making cost and energy consumption less dramatically. So as Google... They also announced that Google's first ARM-based CPU for their data center. They are also using ARM Neovus V2 core in a 50% better performance and up to 60% better energy efficiency. So AI is now... already contributing many places for our technology development or service development and how that will be addressing each sector or each industry. And that's something that the engineers and experts in technology is looking into. Such area, mobility, healthcare, service, finance, logistics, manufacturers, those are the areas that are relatively easy to understand how AI is going to be addressed. And with that, we've been invested across various sectors utilizing AI. And also, we've been making investment through Vision Fund, focusing on such areas. and any business models, service models, technology that AI can contribute to. So investments in Vision Fund has about 477 portfolio companies now with those aims and also the highlights and focus. So as Masa said last year, It's like it or not, AGI is coming. AGI revolution is coming. That's a kind of a very basic story for us. And if that's the case, we want to become the lead for the AGI because we believe in 10 to 20 years, companies and individuals working on AGI will lead humanity. So that's why that we are preparing for the base for another growth or another step for the company. And this is an invested amount so far. Fiscal year 2023, 3.9 billion invested, so almost the same as last year. Last year is about 4 billion investments, and this fiscal 2023 was 3.9. But on your far right, you see the dotted bar chart, a bar graph. This is the total committed capital of strategic investments. And this accounts for 5 billion. So in the whole year, in the coming few years, we would like to invest in this amount. And this is a committed amount. So This is almost about the same or align with the invested amount in the this year and the last year. So 4 billion plus 5 billion equals to 9 billion is somewhere that we've been facing at. And that actually is almost double the size of the fiscal 2022. strategic investments. In this fiscal 23, main sector we focused on is the industrial automation and robotics or autonomous driving. So those are the areas that we mainly invested relatively bigger than the others. Each individual portfolio Sometimes they're coming from the same sector so that they'll be able to show a good synergy in between, which I will be touching on in a later page. And one example of the joint venture that I would like to introduce you today is Greenbox Systems. And this joint venture is was done between Symbotics and the SoftBank Group. Investment in Greenbox actually is actually coming from this $5 billion that I mentioned earlier as a committed capital of the strategic investments. So this Greenbox system is going to be providing a warehouse as a service to those customers, clients. So that's our plan. And recently, the first site in California has already launched. They're making a smooth operation, and we're expecting 100% capacity offtake signed today. So these are the projects that we're working on one by one so that we'll be able to have a good lead in terms of AI. for each sector. And I believe this is an area where we'll be able to see the good results relatively sooner than the others. So that's something that we'll be able to share sometime soon for the results out from such joint venture. And these are the AI reshaping industrial automation. So I mentioned like a Symbiotic Greenbox or the Berkshire Grey. They are very much in a similar sector, especially Symbiotics. They are end-to-end case handling system with AI-powered. So optimization of the palettings is also powered by AI. Berkshire Gray, this is the AI-powered picking and sortation solutions company. So various type of the products is picked and sorted in an automated way. And if you take a look at their own technology, it's quite interesting. And Oatstore, so they are the company with the AI-powered modular ASRS system, enhancing operations and storage without IOs. So these three... are different in a way and also having a very good technology. And they are a portfolio company invested from our group, and I believe they will be able to have a very good synergies with existing portfolio companies for the future growth. And after May, this is relatively recent that we made the investment in the company called Wave in UK. They are the company that provides end-to-end deep learning autonomous driving system. And this time was the 1 billion investment round, and we were main participants. And NDBDA is the first new investor, and also they already have an existing investor, Microsoft. So they have been very much good, well evaluated by many companies. Actually, they are providing a different type of the autonomous driving compared to the traditional autonomous driving technology, very much end-to-end, deep learning autonomous driving system on public roads. And with the huge traffic data or driving data, based on the external circumstance, they can make a judgment to do drive. So each vehicle... look and think and decide to take a route. So this is called also as GPT for driving and I would like to show you some video.