Softbank Group Corp

Thank you very much for waiting, everyone. Now, we would like to start the SoftBank Group Corp Earnings Results Announcement for six-month period ended September 30th, 2024. First of all, I would like to introduce today's participants. From left, we have Mr. Yoshimitsu Goto, Board Director, NCFO, Ms. Kazuko Kimiwada, Corporate Officer, Senior Vice President and Help Accounting Unit. Mr. Navneet Govo, CFO, SV Investment Advisors and SV Global Advisors. And Mr. Ian Thornton, IR Vice President, ARM. Today's announcement is live broadcast over internet. Now, I would like to invite Yoshimitsu Goto to present you the earnings results and business overview. Mr. Goto, please. Thank you for the introduction. This is Goto speaking. Thank you very much for joining during your busy schedule. Here, we would like to announce the numbers, which actually I'm quite happy with, with good numbers, good results. The one thing that I couldn't achieve this term was at Hawkes. could not win the Japan Championship, which is one big leftover. that's something that we need to do, challenge again for the next year. So there is no reason for the loss. So I believe that we need to review once again and do it again. Actually, the earnings is not the lose, actually win. And the win, there is no, there is a reason for win as well. So I would like to explain why this time for the good numbers. Start with highlights. Net income. was over 1 trillion yen, mainly driven by good performance of investments, which has been challenge in the past two years, which is a vision fund, made a good performance this quarter. And also T-Mobile share price is doing pretty good. So as a result, that made quite a good contribution to the earnings results this time. Net asset value, which is actually our enterprise value itself of our company, remained high at 29 trillion yen at the end of September. After then, market is doing much even better so that that brings us even better results for the latest number-wise. Vision Fund recorded 610 billion yen as an investment gain and also posting cumulative gains, which is another kind of highlights in the symbolic message to the market. And performance also continues to excel. And as a result, we are able to maintain the very robust and stable finance, financials, and also maintain ample cash reserves, which will enable us to further AI investments. So I'd like to go into a little bit of more details, starting with consolidated results. I mentioned net income for the first half exceeding 1 trillion yen now compared to the year ago a first half of 2023 actually is increased by 2.4 trillion yen and investment gains was 2.6 trillion yen so that compared to the last year first half 3.6 trillion yen increase the breakdown of these numbers will be followed by next pages here the investments gain and loss and net income quarterly basis two trillion yen and over of the gain on investments for the quarterly basis and if you see more in details 2 trillion yen gain in investments, mainly due to the blue portion, 567 billion yen from the Vision Fund. In the green bar, inside of it, you see the dotted lines, which is the T-Mobile contribution by 387 billion yen. So total of the Vision Fund and the T-Mobile, over 1 trillion yen of the performance contribution. Remainings, you may wonder, is actually from the Alibaba share transaction. This is financially, it's all completed financing. And as a scheme, we have used the prepaid forward contracts As a result, we set the share price and agreed the future sales and get the money in advance. And because there are some share remain for before the settlement and actually have a market variations and evaluation gain was about 1 trillion yen or so. but that also been settled. Therefore, this is the kind of adjustments. So the sales has already been completed, and later on, even that share price increase, but still, that does not impact to the cash settlements. Therefore, accounting-wise, evaluation increase. However, that's been already done. So that's gonna be adjusted through the derivative transaction. In total, it's about 1 trillion yen. However, at the same time, we see the forex movements. And because of the forex movements, we have about the difference of 400 billion yen. So green portion is the gain on Alibaba shares. But below, 1.4 trillion yen with the 400 billion yen of the forex impacts. And that also needs to be considered altogether. So put 2 trillion yen of the positive, you can exclude the developer settlements. So maybe 1 trillion yen of the vision funding at T-Mobile is a big contributor for the performance this time. But even with that, compared to the first quarter or the quarter on for the 2023, actually we are making quite a steady growth, which is a very happy result for us. and key indicators. Three indicators that we see as the key indicators, net asset value, loan-to-value, and also cash position. Net asset value, as you saw on the previous pages, ¥29 trillion at the end of September. Loan-to-value, 12.5%. Cash position, ¥3.8 trillion. Not only net asset value, but the loan-to-value and cash position that was also contributed by the good market performance And the latest wise, loan to value probably less than 12%, somewhere around 11%. And cash position, because of the Forex, actually that we are exceeding 4 trillion as of latest number wise. So it is positively moving as a matter of fact. Net asset value see slight decrease mainly because SoftBank Corp decreased slightly. Instead, we see the increase in T-mobiles and Vision Fund. And also, we have a Forex impact, so we have some kind of a bounce back. Starting from 1998, this is a history of Net Asset value of ours. 29 trillion. I believe that that gives you the good latest view on SoftBank Group.

About the T-Mobile that I touched upon some time earlier, it was 21 when we acquired Sprint. we acquired Sprint in 2023 and since then they were turning around the business and in 2020 they were merged with T-Mobile and back then the stock price was $82 but at the last day of last week it went up to a historic high of $238 or three times bigger than the one, three, and we emerged with T-Mobile and Sprint. Since the merger compared to other carriers in terms of index, like AT&T, Verizon in the U.S., and Tynemobile, which was the number one in the world, and NASDAQ, which is a tech-related index, if you compared with them, T-Mobile outperform China Mobile, AT&T, and Verizon. Even against Nasdaq, T-Mobile is way ahead. So looking at the stock price or market cap, if you take a look at on the left-hand side, when we acquired Sprint, 2012, actually, back then, This tiny, tiny bar was T-Mobile plus print, 22 billion, so far behind Verizon and AT&T. As of end of September, however, T-Mobile exceeded not only AT&T, Verizon, but also China Mobile, which once was number one in the world. Where this growth come from? Free cash flow. This pink is T-Mobile. As you can see, the free cash flow is building up steadily. On the other hand, Verizon and AT&T, in the last four or five years, they are on the declining trend. So it's very clear contrast between T-Mobile and their competitors in the U.S. So from our investment performance perspective, equity, we put about 0.4 trillion and 2.1 trillion was leveraged and borrowing was already repaid and equity value grew from 0.4 to 3.9 trillion and MOIC was almost nine excuse me ten times and the equity IRR 26 percent so performance was clearly good We reminded you on this because T-Mobile contributed a lot to our great performance for this term. And still some people believe SoftBank failed in the Sprint transaction, but probably it's our fault not being able to communicate well with the community. But again, we just wanted to show again, our investment in Sprint turned out to be great. Talking about investment of SoftBank, Alibaba, ARM, and Sprint were the major investments we made so far. Alibaba, we invested a little bit in the beginning. So MOIC is tremendous, like 1,340 times, but that's reality. of 3 billion investment, 2.3 was equity, and MOIC was 8, and ARRA is almost 30%, and we can still expect upside because ARRA will play a key role in AI development. about Forex which has been fluctuating. In the first half of this fiscal year, it was 151 yen per dollar as of March end, and as of end of September, 142 yen. At this level, the forex change had a negative impact on NAV by 1.9 trillion and also negative impact on equity by 1.3 trillion negative but on the other hand positive impact on net income consolidated net income by 0.3 trillion yen And now that Mr. Trump was elected as the president and the rate is around 153 yen per dollar recently. So again, market condition changes as forex changes so looking at that kind of changes will be flexible in terms of what kind of actions we should take about the cash position for this quarter arm listed last year and at that time we purchased a vision fund holding and in this term the payment took place so investment related including installments for our share transaction consideration was a driver of reduction of the cash position. On the other hand, we did debt financing. So from a cash flow perspective, we saw a positive number. But all in all, net cash position as of end of September was 3.8 trillion. But more recently, it should exceed over 4 trillion, thanks to the better market condition. And always keeping two years worth of bond of redemption is the commitment we make and we are actually making the commitment in fact not only two years but also three four years of bond of redemption can be possible at this cash position LTV 12.5%, very stable and low level. Recently, even lower than 11%, so even much safer. Looking back the history of cash position, this is the trend. Constantly, we have kept around 4 trillion. Now, shifting gear to SPF.

So, quarterly-based gain and loss on investments. This quarter, 4 billion gain in this quarter, which is very good number, this combined vision funds numbers. In the past few years, there are big ups and big downs. But when we see the big downs, we always tried the very conservative marks or valuations. And I believe based on such a history, I believe that we were able to make a good result. So we would like to maintain our very conservative view and at the same time share such numbers and results. First, there are two – Vision Fund 1 and 2 being started, and on your left-hand side, the navy one is the Vision Fund 1 results. Mainly public shares and also the private shares are making a good momentum. And actually, the highlights this quarter is on your right-hand side, Vision Fund 2, because the investment started about three years ago, and the valuation for the private equity was relatively high back then. And also, after then, market kind of sluggished. Therefore, that has been impacted to the number. and still the lots of public private securities in the Vision Fund too, but this time that we see the good improvements and also the inside of the portfolio, we've been seeing lots of good potentials and that we believe is making a good work to boost overall results for the Vision Fund too. And here's some highlights for the Vision Fund. One, portfolio companies, For the public company wise coupon, fair value was 8.6 billion. And along with the increasing in valuation, we have a 1.2 billion unrealized gain, valuation gain is recorded. And ride-sharing company Didi in China, it's like an Uber type of company, and they have withdrawn from the U.S. market once, but still the transaction is ongoing, and the fare value is now 4.6, and this is also making a good growth. These two are the kind of major highlights for the Vision Fund 1, but also including the other public portfolio companies this quarter, 2.8 billion in total of the public companies. Vision Fund 2, now that we see IPOs from the portfolio companies in Vision Fund 2 more and more, And this time, this quarter, especially the good contributor was the OLA Electric Crystal Pi. There are also other public companies, but it hasn't spent too much time after the IPO, so that's not making a big contribution to the result. But at the same time, we do have a good pipeline. The private companies in total is a little bit shy of 1 billion, and that was another good contributor for this time result. So with the small efforts by the each portfolio companies that comes down up to this number, if you go inside, you see that Revolut or Klarna, they are making a good growth now. For the details of Vision Fund 1 and Vision Fund 2, we will be able to share, as we have Navneet in person, so that he will be able to give you more colors, obviously, at the investor briefing after this announcement. And here, the gain and loss on investment cumulative here, It's turned to positive for the first time in nine quarters. I believe that is kind of a big message for us this time because In the past two years or so, we've been working hard, but also we're not able to bring to the positive number. But now that we are able to come to this close, of course, we may see a volatility ahead. But now that we're seeing more and more public companies, public portfolios in Vision Fund 1 and Vision Fund 2 also start seeing More and more companies entering into the late-stage portfolio or companies are increasing, so that's something that we are very much expecting in the future. Vision Fund 1, cumulative investment return recap. On your left-hand side is the investment cost because Vision Fund 1 already finished its investment period. So 89.5, no change between June and September end. And the current cumulative investment return on your right-hand side, those two bars, far right is the end of September number, $112 billion. Three months before, so like June end, Actually, you see the good growth from June end to September end. Green portion is the already exited and blue. We're seeing improvements in public companies. Those are the companies that we still hold. And dark blue in the very bottom, those are the private companies. Here in the private companies, we do still have a good attractive companies such as ByteDance, Fanatics. So those are also, we have a good expectations for the valuations. And not only that, we have some others as well. So now that we are reaching to 112 billion, So we believe we start seeing a good kind of the results for the return for the Vision Fund 1 now. This fund life will be 2029, and also they have a two-year extension option too. Vision Fund 2, investment costs on your left-hand side. 53.6 billion investments so far and still having a bit difficult quarters in the past for the performance, but this September end, we were able to achieve 32.6 billion return. Compared to Vision Fund 1, it still have a good proportion of the investment portfolio is still the private companies. So we would like to keep a good eye on them. And of course, in addition to that, that we would like to continuously have new investment activities. So that's gonna be also another important factor for Vision Fund 2 performance. And let me also go into a little bit more details in the Vision Fund 2 portfolio companies. And this is the public listings and the pipelines. We have 53 listings so far since inception. And also for this second quarter, we had two IPOs, First Cry and Ola Electric. On your right-hand side, late-stage portfolio, they, in a good growth, they can start seeing for all the preparations. And we're seeing the $34 billion for the late-stage portfolio by Dance Fanatics or Ola, which is a parent company for Ola Electric that went IPO this time. And on your right-hand side, Vision Fund 2 and Latam Fund. Teipei in Japan is also the good expectation we have. And Suigi, which is also close to the IPO. And OpenAI, we made investments from Vision Fund 2 this time, which I will touch on later page. And two companies that went public this time for this quarter. This is from a portfolio company of Vision Fund 2, FastCry. and Ola Electric. Both are the IPO in Indian market. Fast Cry, as you can imagine from the name of the company, this is the online store for newborn and baby and kids products. And on your right hand side, Ola Electric, this manufactures electric scooters and provides products globally. So they got scooters, so-called. That's the main products for this company and well received in the market. And MOIC is also very stable now. In Vision Fund 2, also making new investment activities in very selective manner and adding one by one. One of which is Glean, that provides best-in-class search functionality and higher user-friendly AI agents for enterprise. Also, Poolside, which supports developers in improving work efficiency by building generative AI tools for software development and coding. And OpenAI, which is well-known by you in the market, I believe.