Softbank Group Corp. · TSE:9984
Softbank — Q3 FY2016 Earnings Presentation
76 slides from Softbank's earnings presentation, Feb 8, 2017
Slide 1: Earnings Results for the 9-month Period Ended December 31, 2016
February 8, 2017 Earnings Results for the 9-month Period Ended December 31, 2016 Masayoshi Son
Slide 2: Disclaimer
Disclaimer This material was prepared based on information available and views held at the time it was made. Statements in this material that are not historical facts, including, without limitation, plans, forecasts and strategies are “forward-looking statements”. Forward-looking statements are by t
Slide 3: Disclaimer
Disclaimer Neither SoftBank Group Corp. nor any of its applicable affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the information in this material, other than the historical financial performance set forth herein. This material speaks onl
Slide 4: Business Domain = Information Revolution
Business Domain = Information Revolution 2
Slide 5: Driving the Information Revolution Since Establishment
Driving the Information Revolution Since Establishment IoT PC (Distribution) PC Internet Mobile Internet (Internet of Things) 3
Slide 6: Accelerate Information Revolution
Accelerate Information Revolution 4
Slide 7: Consolidated Results
Consolidated Results 5
Slide 8: Consolidated Results
Consolidated Results (JPY bn) FY2015 FY2016 Q1-3 Q1-3 Change Ratio Net sales 6,603.8 6,581.5 -22.3 -0.3% Adjusted EBITDA 1,822.4 1,994.1 +171.7 +9% EBIT 804.7 949.7 +145.0 +18% Net income 429.0 857.4 +428.4 +100% Net income: net income attributable to owners of the parent 6
Slide 9: Net Sales
Net Net Sales Down 0.3% Sales (JPY bn) 6,603.8 6,581.5 ARM Earnings reflected since Sept. 6, 2016 Sprint 2,927.7 2,652.0 Impact of strong yen (-JPY 360.6bn ($ 24.1bn) ($ 24.8bn) Increase in dollar terms Distribution & others 829.1 889.4 630.8 Yahoo Japan 444.7 Consolidation of ASKUL Domestic Telco 2
Slide 10: Adjusted EBITDA
Adjusted EBITDA (JPY bn) 1,994.1 Up 9% 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 (FY) Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Japanese-GAAP IFRSs *FY2013-2014: excluding impact of GungHo & Supercell 8
Slide 11: Adjusted EBITDA
Adjusted EBITDA (JPY bn) 1,994.1 1,822.4 787.7 Sprint Cost reduction effort Up 9% Impact of strong yen (-JPY 106.6bn) 744.8 ($ 7.4bn) Up 20% in dollar terms ($ 6.1bn) Distribution, ARM & other 179.2 Yahoo Japan 156.2 Domestic Telco 930.2 994.7 Revenue increase & cost reduction effort (Exchange rate)
Slide 12: EBIT
EBIT (JPY bn) 949.7 Up 18% 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 (FY) Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 *FY2013-2014: excluding impact of GungHo & Supercell Japanese-GAAP IFRSs *FY2013: excluding one-time gain from consolidation of WILLCOM 10
Slide 13: EBIT
EBIT (JPY bn) 804.7 949.7 145.2 Sprint Up 18% 59.5 Impact of strong yen (-JPY 20.6bn) Up 179% in dollar terms 150.5 193.7 Yahoo Japan One-time gain from consolidation of ASKUL (JPY 59.4bn) Domestic Telco 651.5 598.3 Revenue increase & cost reduction effort (Exchange rate) FY2015Q1: JPY121.34 / USD Q
Slide 14: Net Debt EBITDA Multiple (Consolidated)
Net Debt EBITDA Multiple (Consolidated) 6.2x (after Vodafone K.K. acquisition) 4.3x 3.8x Target leverage 3.5x *1 Adjusted EBITDA for FY2014 has been revised retrospectively due to GungHo becoming an equity 2006 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’16 method associate. June Mar. Mar. Mar. Mar. Ma
Slide 15: Status of Major Segments
Status of Major Segments 13
Slide 16: Domestic Telecommunications
Domestic Telecommunications 14
Slide 17: EBIT Domestic Telco
EBIT EBIT Domestic Telco (JPY bn) 651.5 598.3 Up 9% *FY2012-2016: IFRSs 2012 ’13 ’14 ’15 ’16 (FY) After FY2014: Domestic Telecommunications segment Up to FY2013: Mobile Communications segment + Fixed-line segment + Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 Broadband Infrastructure segment 15
Slide 18: Subscribers (Main Subscribers)
Cumulative EBIT Subscribers (Main Subscribers) Domestic Telco 31.69m 32.23m +540k YoY Handsets steady, decrease in Pocket Wi-Fi, etc. 2014 ’15 ’16 (FY) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 16
Slide 19: Generate Synergies with Yahoo Japan
Generate Synergies ショッピング with Yahoo Japan Domestic Telco ショッピング ＜赤＞ ＜グレー＞ PANTONE 185 PANTONE Cool Gray 11 DIC 156 DIC 541 M91%+Y76% BL80% R255・G0・B51 #545454 Gray ●2行ロゴ リンク用ロゴなどスペースが狭い場合に使用できます。 481k merchants ショッピング ショッピング 250m items ●その他色指定 白抜き利用の場合（背景色は任意） ※紫ロゴは原則使用しないでください。 SoftBank smartphone
Slide 20: Cumulative Subs (FTTH Service)
Cumulative Subs (FTTH Service) Domestic Telco 3.14m 2.6x YoY 2.70m 1.22m 2014 ’15 ’16 (FY) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 *SoftBank Hikari includes SoftBank Air. 18
Slide 21: Free Cash Flow
Free Cash Flow Domestic Telco (JPY bn) 434.9 FY2016 forecast: 239.4 upward revision (JPY 500bn => JPY 550bn) 3.6 FY2014 FY2015 FY2016 Q1-3 Q1-3 Q1-3 Free Cash Flow = operating cash flow + investing cash flow *IFRSs excluding eliminations within SoftBank Group Corp. 19
Slide 22: FY2016 Forecast
FY2016 Forecast Continue profit growth 1 (toward 12 consecutive periods) 2 FCF revised upward to JPY 550bn (+50bn) Domestic Telco 3 Focus on smartphones & FTTH 4 Expand business areas and synergies with Yahoo Japan *Toward 12 consecutive periods: after FY2014: Domestic Telecommunications segment Up
Slide 23: Yahoo Japan
YAHOO! JAPAN
Slide 24: Advertising Revenue
Advertising Revenue (JPY bn) 72.9 66.0 37.5 Display 32.6 (+15%) ads +10% YoY 35.4 Search 33.4 (+6%) ads (FY) 2013 ’14 ’15 ’16 (FY) Q3 Q3 Q3 Q3 22
Slide 25: Yahoo! Shopping Number of Merchants
Yahoo! Shopping Number of Merchants ショッピング 481k 16x ＜赤＞ ＜グレー＞ PANTONE 185 PANTONE Cool Gray 11 DIC 156 DIC 541 M91%+Y76% BL80% R255・G0・B51 #545454 Gray ●2行ロゴ リンク用ロゴなどスペースが狭い場合に使用できます。 in 3 years ショッピング ショッピング ●その他色指定 白抜き利用の場合（背景色は任意） ※紫ロゴは原則使用しないでください ＜紫＞ ショッピング PANTONE 259 DIC 227 C65%+M100%+K15% R
Slide 26: Shopping Transaction Value
Shopping Transaction Value ショッピング (JPY bn) 140.7 Doubled ＜赤＞ ＜グレー＞ PANTONE 185 PANTONE Cool Gray 11 DIC 156 DIC 541 M91%+Y76% BL80% R255・G0・B51 #545454 Gray ●2行ロゴ リンク用ロゴなどスペースが狭い場合に使用できます。 in 3 years ショッピング ショッピング ●その他色指定 白抜き利用の場合（背景色は任意） ※紫ロゴは原則使用しないでください ＜紫＞ ショッピング PANTONE 259 DIC 227 C65%+M100%+K
Slide 27: Sprint
Sprint »
Slide 28: Acquisition of Sprint in 2013
Acquisition of Sprint in 2013 26
Slide 29: Terrible Track Record
Terrible Track Record Network (2014H1) Net Adds (Postpaid phone) Verizon 81.6 Net loss AT&T 79.5 T-Mobile 71.5 -500k Lowest Sprint 69.6 (Source) RootMetrics 2012 2013 2014 (FY) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Wireless EBITDA Margin (2014) Adjusted FCF 48% Low 42% -$ 1.4bn profitability Negative 25% 22
Slide 30: Turnaround Strategies
4 Turnaround Strategies Network Improvement Net Adds Improvement OPEX Reduction Diverse Financing Methods 28
Slide 31: Network Reliability and Consolidated CAPEX
Consolidated CAPEX (April 2015 - September 2016) Network Reliability (USD bn) AT&T 32.0 1% difference Verizon Sprint 25.5 T-Mobile Lowest 7.6 5.6 Average network reliability (voice & data) based on Sprint’s analysis of Nielsen drive test data in the top 106 metro markets 2014 2015 2016 AT&T Verizon
Slide 32: RootScore Awards (Metropolitan Areas)
RootScore Awards (Metropolitan Areas) 246 166 Most ever RootScore Awards Number of outright or shared first-place for 6 indexes of network performance measured in metro markets. 2016 2016 (CY) (Ref.) 6 indexes: overall, reliability, speed, data, call, text H1 H2 Source: RootMetrics 30
Slide 33: Net Additions (Postpaid Phone)
Net Additions (Postpaid Phone) 366k 368k Steady Postpaid net port positive for 3 consecutive quarters -205k -407k 2013 ’14 ’15 ’16 (FY) Q3 Q3 Q3 Q3 *Q3: October - December *Sprint platform 31
Slide 34: Churn (Postpaid Phone)
Churn (Postpaid Phone) 2.25% Maintain low level 1.57% 1.53% 1.0% 2014 ’15 ’16 (FY) *Q3: October - December *Sprint platform Q3 Q3 Q3 32
Slide 35: Net Operating Revenue
Net Operating Revenue USGAAP (USD bn) Growth 26.7 26.3 24.1 $ 24.8bn 2013 ’14 ’15 ’16 (FY) Q1-3 Q1-3 Q1-3 Q1-3 *Q1-3: April - December 33
Slide 36: Cost Reduction
Cost Reduction USGAAP (USD bn) $ 13.7bn $ 12.1bn Significant Amount of reduction reduction -$ 1.6bn SG&A Cost of service 2015 2016 (FY) Q1-3 Q1-3 *Q1-3: April - December 34
Slide 37: Adjusted EBITDA
Adjusted EBITDA USGAAP (USD bn) $ 7.3bn Joined Double SoftBank Group 6.0 3.9 4.3 in 4 years 3.6 2012 ’13 ’14 ’15 ’16 (FY) Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 *Q1-3: April - December 35
Slide 38: Operating Income
Operating Income $ 1.3bn USGAAP (USD bn) Significantly Joined SoftBank Group 0.3 improved -1.6 -1.9 -2.2 2012 ’13 ’14 ’15 ’16 (FY) Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 *Q1-3: April - December 36
Slide 39: Adjusted Free Cash Flow
Adjusted Free Cash Flow USGAAP (USD bn) $ 0.5bn Significantly improved -1.6 -2.0 -2.4 Joined SoftBank Group -4.1 2012 ’13 ’14 ’15 ’16 (FY) *Q1-3: April - December Adjusted FCF: the cash provided by operating activities + the cash used in investing activities Q1-3 Q1-3 Q1-3 Q1-3 Q1-3 (excluding short
Slide 40: Liquidity
Liquidity USGAAP (USD bn) 10.3 Vendor financing 1.2 3.0 Sufficient level Revolver 6.6 Other repayments (Handset lease, etc.) 1.8 Network equipment financing Cash 1.7 + cash equivalent 6.1 + short-term investments Note maturities 3.1 Liquidity Maturities* (Dec. 2016) *Including maturities due by Dece
Slide 41: Holding Value
Holding Value JPY 3.09t After acquisition +58% JPY 1.95t Share price USD 8.34 (JPY 111.8/dollar) Avg. share price USD 6.90 (Avg. exchange rate: JPY 85.2/dollar) Acquisition cost Current (Feb. 7, 2017) *Excl. acquisition-related expenses. 39
Slide 42: FY2016 Forecast
FY2016 Forecast 1 Adjusted EBITDA $ 9.7-10.0bn 2 Operating income $ 1.4-1.7bn 3 Cash CAPEX $ 2.0-2.3bn 4 Adjusted FCF around break-even Cash CAPEX excluding the CAPEX associated with purchasing leased devices in indirect channels Adjusted FCF: the cash provided by operating activities + the cash use
Slide 43: 41
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Slide 44: Revenue
Revenue (JPY) 138.1bn 127.3bn Up 8% ($ 1.28bn) ($ 1.18bn) 2015 2016 Apr. - Dec. Apr. - Dec. (Note) USD 1 = JPY 107.88 (average exchange rate of April - December 2016) 42
Slide 45: ARM Powered SoCs Shipped
ARM Powered SoCs Shipped 12.5bn 11.0bn Explosive growth continues 2006 ’08 ’10 ’12 ’14 ’16 Apr. - Dec. Apr. - Dec. Apr. - Dec. Apr. - Dec. Apr. - Dec. Apr. - Dec. 43
Slide 46: R&D Spend
R&D Spend (JPY) 34.9bn (£ 243m) Accelerate 23.4bn up-front investment (£ 163m) 2015 2016 (FY) Q1-3 Q1-3 (Note) GBP 1 = JPY 143.72 (average exchange rate of April - December 2016) 44
Slide 47: Strategic Progress: Networking & Servers
Strategic Progress: Networking & Servers Europe’s leading research center selects ARM- based chip for next generation supercomputer Barcelona Supercomputer Center: A public research center located in a former chapel at Polytechnic University Catalonia 45
Slide 48: FY2016 Forecast
FY2016 Forecast Continue to invest in 1 new technology and markets Gain more share in 2 long-term growth markets Create new opportunities 3 from the Internet of Things 46
Slide 49: Alibaba Group
EO Alibaba Group
Slide 50: Total Revenue
Total Revenue JPY 847.2bn USGAAP 549.6bn Up 54% 2011 2012 2013 2014 2015 2016 (Source) Created by SoftBank Group Corp. based on publicly available historical information published by Alibaba Group Holding Limited Oct. - Dec. Oct. - Dec. Oct. - Dec. Oct. - Dec. Oct. - Dec. Oct. - Dec. USD 1.00 = JPY
Slide 51: Non-GAAP Net Income
Non-GAAP Net Income JPY 357.8bn USGAAP Non-GAAP (Excluding the gains and losses related to share based compensation expenses, amortization of intangible assets, revaluation of investments etc.) 263.7bn Up 36% 2011 2012 2013 2014 2015 2016 (Source) Created by SoftBank Group Corp. based on publicly av
Slide 52: Free Cash Flow
Free Cash Flow JPY 542.9bn USGAAP Non-GAAP Up 44% 377.4bn 2013 2014 2015 2016 (Source) Created by SoftBank Group Corp. based on publicly available historical information published by Alibaba Group Holding Limited Oct. - Dec. Oct. - Dec. Oct. - Dec. Oct. - Dec. USD 1.00 = JPY 108.72, USD 1.00 = RMB 6
Slide 53: The Next Generation LEO Satellite Communications
The Next Generation LEO Satellite Communications (Note) LEO: Low Earth Orbit 51
Slide 54: Structure: $1.2bn investment
Structure + Existing investors Support technological development and mass production $ 1.2bn ($ 1bn from SBG) 52
Slide 55: LEO Satellites Features
Features Signa ls LEO Satellites (>720) 36,000km 1,200km GSO n a ls e) Sig erferenc int (No s i g n als GSO Provide low latency, high speed, global coverage at low cost (Note) LEO: Low Earth Orbit GSO: Geosynchronous orbit Over 720 satellites: plan to design and build 53
Slide 56: OneWeb
OneWeb
Slide 57: Communication Speed
Communication Speed Downlink Uplink (Max.) (Max.) 200Mbps 50Mbps 55
Slide 58: Cellular Backhaul
Cellular Backhaul 56
Slide 59: Not-Spot Coverage and Responder Communications
Not-Spot Coverage Responder Communications Extension of Existing Wireless Service Coverage 57
Slide 60: LEO Satellite
LEO Satellite OneWeb Antenna 58
Slide 61: Track Record
Track Record 59
Slide 62: Track Record: IRR 44%
Track Record $ 110bn Internet companies IRR 44% (18 years) 16x $ 7bn (Japan) Accumulated investment Cumulative return (1999 - Jan. 2017) (Exchange rate) USD 1.00 = JPY 112.79 60 As of January 31, 2017
Slide 63: Track Record: IRR 43% excluding Alibaba
Track Record $ 30bn Internet companies (excluding Alibaba) IRR 43% (18 years) 5x $ 7bn (Japan) Accumulated investment Cumulative return (1999 - Jan. 2017) (Exchange rate) USD 1.00 = JPY 112.79 61 As of January 31, 2017
Slide 64: Track Record: IRR 43% including SBM and Sprint
Track Record $ 190bn Internet companies (including SBM and Sprint) IRR 43% (18 years) 7x $ 26bn (Japan) Accumulated investment Cumulative return *1 (Exchange rate) USD 1.00 = JPY 112.79 (1999 - Jan. 2017) *2 Includes SoftBank Mobile Business (former Vodafone Japan) and Sprint. 62 As of January 31, 2
Slide 65: Accelerate Information Revolution
Accelerate Information Revolution 63
Slide 66: PC Internet Revolution
PC Internet Revolution PC Chip PC Internet 64
Slide 67: Mobile Internet Revolution
Mobile Internet Revolution Mobile Chip Smartphone Internet 65
Slide 68: Internet of Things Revolution
Internet of Things Revolution Chip All sorts of devices (90% ARM) 66
Slide 69: Surpasses Human Wisdom
Surpasses Human Wisdom All sorts of devices Cloud Artificial Intelligence (Chips) (Big Data) (Deep Learning) 67
Slide 70: 90% ARM
90% ARM 68
Slide 71: Singularity
Big Bang within 30 years SINGULARITY 69
Slide 72: Singularity: Redefine all industries
SINGULARITY Redefine all industries 70
Slide 73: SoftBank Vision Fund
SoftBank Vision Fund 71
Slide 74: Strategic Group for Information Revolution
Strategic Group for Information Revolution 72
Slide 75: Information Revolution - Happiness for everyone
Information Revolution - Happiness for everyone 73
Slide 76: Adoption of IFRSs, Definition of terms, Trademarks
1. Adoption of IFRSs SoftBank Group Corp. adopted the International Financial Reporting Standards (IFRSs) from fiscal 2013. Figures for fiscal 2012 have also been presented in accordance with IFRSs. 2. Definition of terms etc. in this material. Free cash flow = cash flows from operating activities +