Softbank Group Corp

Thank you very much for waiting, everyone. Now we would like to start SoftBank Group Co-op Earnings Results Announcement for the three-month period ended June 30th, 2024. First of all, 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 Unit. Navneet Govel, CFO, SB Investment Advisors and SB Global Advisors. And last but not least, Jason Child, Executive Vice President, CFO. Thank you very much for understanding that Jason is attending over Zoom. 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. Mr. Goto, please. Well, good afternoon, everyone. Thank you very much for joining our earnings results announcement today. Let me start our explanation on the earnings results for the first three months period for 2024. This is the first page, the first quarter. So this is the end of June number that we are sharing with you. So you see that this is the market status up until the end of June. That was the market. However, after this, we had a big volatility in the market, and this is the current situation. So you can see on your far left at the end of September last year, which was the timing of our IPO. So starting as then in share price and the SPG share price, and also some KP indexes that we tried to compare those movements. You can see the day before yesterday, there was a big decline in Nikkei since Black Monday. And yesterday was the biggest record high increase in share price of Nikkei. So Black Monday, if you recall, 1987, October 20th. On 1987, I graduated from college, and starting April, I started working at Yasuda Trust Bank. And then, I'm one of the survivors from Black Monday, and I believe people here may not at the business circumstance. Many of the media's related people, those young generations, if you see those three days in the past, I understand those are the headlines for the newspaper. But for me, because I experienced Black Monday, I have a bit different angle because in the past 40 years, market structure or instruments, products that traded in the market or the payment speed, settlement speed or the size of the payments or size of the settlement has dramatically changed since then, along with the technology development. Financial engineering has also developed over the time. So if you only see the numbers of the decline, then you may be very surprised, but it's not only that. I believe that there are many reasons for the decline, and I think that we do need to analyze the market and the environment, and based on that, I believe that that was the reason why for the declines on the day before yesterday and the increase in the yesterday, so that we'll be able to see the future. Under such a circumstance, what kind of framework each respective company should be prepared? And what the software been preparing for? Our business model, I believe, is one of the most unique business model. We are investment company. We are strategic investment company. But at the same time, we are also exploring the challenges in the aim of AI era to come. And we do need to see the both sides. Our business model itself does have very affluent assets, and those assets, in principle, are businesses or companies who will be able to take an advantage of the AI era or ASI era to come, as our chairman, CEO, Masa Son, mentioned at the AGM in June this year. Also, those companies with many new ideas, that is going to be in our group. Sometimes we raise them from the scratch, so there are a variety of the angles that we are looking at. So while we're monetizing and also raising those assets, grow the business, but also we have a shareholder's returns, financial improvements. Those are very strong financial status. And as a result, we will be able to improve our balance sheet. and those, as a result, be able to provide us the room for leveraging that capacity. So that can be utilized for the bridge to fill the time lag between investment and divestments. And the important thing is, so on's and off's, or the gas and brake, that those are something that we can completely manage by the company. So more simply put, investment, if we invest, we need money. If we don't invest, we don't need money. So we can manage to do investment or do not do the investments. And also, we can decide how far we would like to utilize our balance sheet and our credit and also financing possibilities with partners of the concerned parties. There are many experiences that we have, and the most important thing is that we can be flexible based on the changes of the market and environments. And that's the kind of uniqueness of our company. Page six, key indicators. This is to remind you, once again, that the net asset value, of course, varies based on the market sales. It all goes up and goes down. Six months ago, at the end of December, our net asset value was 19 trillion yen. In six months, it became doubled to 35 trillion yen. In the past few weeks, What's happening here actually pushing our net asset value down to 25 trillion. So in several months, that value varies, which is big volatility, but at the same time, if you put it into our loan to value as a key performance indicator for a balance sheet, even now, it's still about 10.9% level, which is extremely safe level. So from the end of June to today, 10 trillion yen net asset value decreased, but still the safetiness unchanged in material way. Of course, cash position, if we don't spend it, we can maintain so that we are having the same level that from 4.6 to 4.3, this is only from the foreign currency changes. So... I understand that there are kind of possibility of moving around the figures based on the volatilities and every time of the earnings. What I keep telling is that we are not focused on the short-term volatilities, but the important thing is that what we are convinced in business models and target is going to be consistent and be prepared for that. Here, once again, that I wanted to communicate to you that the safetiness of a balance sheet. So we do have a very robust stability, and based on such a stability, we would like to strive for the ASI realization. So such a robustness stability is something that we prepare. And leader, Masa, and also our teams is exploring the best way for the ASI to come. And this is a three-month highlight for the first quarter period, as I mentioned earlier. Or that you may be seeing, sorry, from the newsflash, that the net loss, net loss, that's the kind of words that I've been seeing on the newsflash, but... We do have an investment gain of $559.7 billion. As of the end of June this year, net assets value achieved record high. We will continuously pursuing the realization of ASI through the strategic AI investments. And for that, ARM is very important. And fortunately, ARM performance continues very well. And Vision Fund has also turned positive from the performance point of view. And loan to value and the cash positions. The financial policy, we will be keeping this policy. And also, we do keep the good balance sheet to be able to be agile in terms of the new opportunities and consolidated results. Quarter on quarter, you see the positive numbers here. Net income is negative 174, but the quarter-on-quarter, it has increased by 303 billion yen, mainly contributed by the foreign exchange. In positive points wise, investment gain, 559 billion yen of the positive figure recorded. So, quarter on quarter, 1.2 trillion yen of the increase. Investment and net income gain and loss. Orange lines gain or loss on investment, you see the steady increase. Net income, of course, this has ups and downs because of the variety of the reasons, especially net income negative and positive in investment. This is the first quarter, which has the biggest discrepancy. And I think that mainly this is also coming from the foreign exchange. gain and loss on investments or from which investments that we are seeing the gain. And here, as a holding company, we do have investments and also investments from Vision Fund. Both of them are in positive this quarter. In the past, one side is positive, the other side is negative. But this quarter, finally, we see both positive.

Now, let me share with you key indicators. NAV, LTV, and cash position as of end of June. Net asset value, plenty, 35 trillion yen. Most lately, about 25 trillion, 10 trillion down, but we'll see how it goes in the market. LTV, very safe level. As I mentioned at the last earning call, less than 10% from investment company perspective may mean we don't do a good job, but again, LTV is very safe level and we have plenty of cash. With regards to the net asset value, recently we saw 10 trillion down. If you go down deeper, I mentioned that It was in 1987 when I joined the bank after graduation I majored in history and industry and maybe I didn't know why I ended up working in the financial business But again, as you can see, since 2000, what happened in the era of 2000? There was a so-called net bubble or dot-com bubble. Back then, far left in this chart, you see a small hill. But back then, we thought the hill looked like a mountain. But now we are seeing similar ups and downs. I think there are similarities in the year of 2000 and now. So what drove the increase and decrease in the year of 2000? How much powerful the internet was and how much value that internet could create? People are watching the upside of the internet and the capability of the internet and then the value went up, but now looking at AI, I think investors and people are looking at the trend in a similar angle. I sometimes mentioned technology advances, and once technology advances, technology would not go back. So technology advancement would lead to added value. We don't know how long it takes before the added value is delivered, but definitely advancement of technology should create added value. Looking at the far right of the chart, if 2024 was on the far left of the chart and in 20 years time I think that we will see the similar picture I experienced a tough time since the Black Monday and also I experienced the so-called Lehman shock And the reasons were clear back then. The valuation was long. And the valuation was created artificially. That was when Black Monday happened and when Lehman Shock happened. So compared to those two big events, the internet dot-com bubble in the year 2000 and historic decline of the market that we are looking at recently the situation is not bad actually from the history perspective on Black Monday Traders were using fingers and hands for transaction and trading But now it's completely different picture Anyway, my message is Market moves in a very short period of time And we have to take into account when we see the market Forex The 10-yen move was seen in the last three months What impact this could have on our value? Is it positive or negative? Weka Yen actually is a positive. Why? Because as an investment company, asset or asset value is centered around the dollar. So Weka Yen had a positive impact on NAV 2.1 trillion yen. From accounting perspective, positive impact on equity, but negative impact on consolidated net income. By the way, if you look at a very gray number, 144.98 yen, which was as of yesterday. So yen got strengthened as much as 15 yen in very short of a time. If you have a plus 15 yen, it could mean 600 billion yen of a positive. So anyway, so a Forex move has an impact on PL and equity and NAV. Loan to value, lowest leverage ever. or the safety level is the highest so maybe we have to do more during our job cash position maintain high level about 4.3 trillion yen this chart shows change in composition of asset held we have been decreasing Alibaba's position for some time and we had over 51% of Alibaba four years ago but now we have over 50% of ARB as of June and so that shows how we are positioned against AI and change in regional composition is shown here Four years ago, we were concentrated on China, namely Alibaba. But now we are looking at Europe more than any other regions. So we mitigated risk of China centric position and liquidity is shown or presented as a percentage of listed shares in our portfolio as of end of June over 80% every year share of listed share had been going down for three years but in the meantime we sold down Alibaba's position and we have gained cash, which is safe. But for investors who are concerned about percentage of listed share, I believe that they are happier now looking at the current percentage.

And here on, we would like to explain to you about our initiative to realize SI. Back in June, Masa shared his thoughts at the general shareholders meeting. And here, once again, to confirm, this is his kind of comments, not me, at quite a big mission as a group that we are driving evolutions of humanity. And that's why we would like to realize ASI to fulfill our mission. And to realize that, we would like to drive forward with group-wide efforts. In these efforts, especially, we would like to focus on those three areas. AI chip, which is going to be even more developing, ARM to be leading that. AI data center is also essential to develop AI. And how the AI can be helpful in people's life. And probably the most easiest to see is robots. So those are the main focus for us as a group for the AI. And SoftBank Group, as I mentioned in the very beginning of this presentation, I believe it's very unique company. This is really difficult to find the peers or the similar company. When we have a dialogue with investors, I believe this is one of the agenda. Because I often asked the questions like, how can we compare with, if you would like to compare with somebody, who would be the company that you pick up? But really, I cannot really think of any company that's comparable to our business or the business model. which makes us very unique. And the cluster of number one strategy is something that I must have been explaining to you. And in this current status, this group strategy still applied. So we are not a group only with the capital or partnership, but we have business partnerships or the... sharing the visions or the missions. So there are many relationships, partnerships that we try to grasp for our efforts so that we can create the organic connections with those people. If you look into one by one for the more specific companies, These are the companies that we start, we've been investing with this ASI aim. Graphcore is one of the company. They specialists at designing, developing, and commercializing chip for AI and machine learning. Especially the engineers resources are very much rich in this company. So we, are very happy to be able to have them in our group to have several potential collaborations and partnership with such company. And SP Energy in United States, mainly in United States, they are pursuing renewable energy platforms, and there are already in operations, which is 2 gigawatts, and in construction, 1 gigawatt, and also they are expanding. So currently it's only solar power, but also exploring the optionalities of the energy source. In Japan, Our energy business has been sold last year, but in the United States, we would like to maintain this agenda with this company. And for SoftBank Corp, This is one of the good examples for our efforts for ASI. SoftBank Corp as a telecommunication operator is mainly leading this data center business. Hokkaido and also Osaka Sakai plant by Sharp has already been announced in utilizing those in variety of the places in Japan. or the focus area AI base is allocated. And we also like to be the lead for the AI data center business so that we'll be able to accumulate our know-hows and expertise. Robots There are several investments that we have done and been announced and shared with you at the Earnings Results Announcement occasion. If you look back, 10 years ago, in 2014, Pepper was launched. Pepper is now not only in Japan, but also worldwide. He or she, the pepper is working hard. And I sometimes surprised to bump into pepper in a very unexpected place. And pepper is also evolving. But not only that, we have some such as cleaning robots or serving robots being also the area that the SoftBank Robotics are working on. And I think that you've been seeing these robots these days. If I go golf course, I happen to see the serving robots at the restaurants or cleaning robots, and I start seeing them more often. When the time is ready that I also like to share the market shares of those products and so on. But I think they are doing pretty good in shares as well. And now that we've been seeing logistics automations or AI robots or the autonomous driving, those are the kind of a path that we are looking at from the SoftBank Group's robotics business. More specifically, these are the investees for the robotics business, Valeo, Symbotics, Greenbox, JV, All Store, Berkshire Gray. So distribution solutions, warehouse solutions that we are partnering, working together to develop the business further.