Neural Group Inc. · TSE:4056

Neural — Neural Pocket — Q2 2022 Earnings Presentation

55 slides from Neural's earnings presentation, Aug 10, 2022

Slide 1: Financial Results Briefing Material FY2022 Q2
Financial Results Briefing Material FY2022 Q2 (ended Jun 30th, 2022) Neural Pocket Inc. Aug 10th, 2022 Copyright © Neural Pocket Inc. All Rights Reserved. 1
Slide 2: Four and a half years after founding, a leading edge AI company
Four and a half years after founding, the company has grown to become a leading edge AI company Net sales expansion Global AI market in 2yrs since IPO $1.8 trillion 4.2X Significantly outpacing AI Participation in market annual growth rate smart cities across Japan AI industry Company + 39% +170% Up
Slide 3: Business strategy and company highlights
Business strategy and company highlights 1. 【AI Market Environment】 AI industry is rapidly scaling along with active Edge technology development i. Deep learning has captured the limelight since 2012 with expectations of huge market potential (forecasted global AI market size of 1.8 trillion USD in
Slide 5: AI industry expected to grow to an overwhelming market size
AI industry is expected to grow to an overwhelming market size compared to other growth areas Global market size comparison (Billion USD) +1,718 2021 2030 1,812 +640 +553 679 702 +78 82 149 94 3 39 Web 3.0 Metaverse SaaS AI Emergen Research*1 Grand View Research*2 Allied Market Research*3 Grand View
Slide 6: Shifting from selling AI tech to selling AI-enabled services
The AI industry is scaling through shifting from selling “AI tech itself“ to selling “AI-enabled services” AI tech provider：Selling AI itself Catering to the needs of individual companies, providing customized Project commission AI tech Sales of AI Revenue technology from clients experiments license
Slide 7: AI technology is rapidly evolving
AI technology is rapidly evolving, supporting the growth of the industry Cloud AI Edge AI Conventional approach Our approach Original data (video, etc.) before AI analysis Metadata after AI analysis (text data) Real-time marketing and security data AI analysis in a large cloud server Shift Large sca
Slide 8: Adoption of edge AI accelerating at global leading companies
Adoption of edge AI technology accelerating at many global leading companies NVIDIA DRIVE AGX Xavier Accelerate development of Ethos NPU series, Edge- edge devices for autonomous oriented chips specializing in driving to achieve low latency deep learning to achieve high- and safety unaffected by the
Slide 9: Edge processing is rapidly expanding
Edge processing is rapidly expanding Total data processed at the edge vs in the cloud*1*2 Growth forecast Through 2018 to 2025 Through 2018 to 2025 175 ZB Edge CAGR*4 131 +69% Cloud 32 ZB*3 3 CAGR*4 44 29 +6% 2018 2025 *1 Source for Edge share: What Edge Computing Means for Infrastructure and Operat
Slide 10: We enable smart cities with edge AI
We enable smart cities with edge AI – Our edge AI platform circulates and utilizes data in physical spaces dge AI platform to manage smart cities AI technology Edge technology Privacy protection Smart City that Neural Pocket envisions Immediate parking, No restraints, Flowing roads, Presenting new l
Slide 11: Neural Platform: environment for AI software development and operations
Neural Platform is a comprehensive environment to facilitate robust AI software development and operations Functions Image and overview Functions Image and overview ▪ Manage and provide AI services ▪ Real-time management of (AI models), such as people flow operational (alive/ dead) status of Equipme
Slide 12: Proprietary AI libraries and technologies
Neural Pocket possesses proprietary AI libraries/ technologies to enable the AI-ization of society and smart cities People attribute analysis People emotion and thought analysis Gender/ age Line-of-sight Facial expression, Voice/ emotion Natural language Facial recognition Fashion analysis estimatio
Slide 13: AI libraries operate on a variety of technical standards
Our AI libraries operate on a variety of technical standards, where we contribute as an Edge AI Platformer Examples of edge devices running our edge AI Processor JETSON Xavier NX JETSON Nano JETSON TX2 OS Language Processor OS Language Copyright © Neural Pocket Inc. All Rights Reserved. 13
Slide 14: Established position as an edge AI platformer
As business models in the AI industry diversify, we have established our position as an edge AI platformer Business model Edge AI Platformer AI service provider Cloud AI Service Selling AI-enabled services Scaling service AI tech provider Selling “AI tech itself” Commissioned Edge AI Development AI
Slide 15: Accelerating growth since inception
In the rapidly growing edge AI market, we have been accelerating growth since inception Company growth strategy and expansion progress Track record Net sales M JPY 4,500 Focus Channel Inc., NETTEN Inc. consolidation Annual growth rate 4,000 since company founding Sep 2022 3,500 3,000 Parking mobilit
Slide 16: Smart city AI is the largest and fastest growing segment at SenseTime
Smart city-related AI services is both the largest and the fastest growing segment at SenseTime, the world’s largest AI company The use of AI as a platform and utilization in Smart Cities is driving company-wide growth 2020 2021 +57% (million RMB) +32% 2,143 1,958 1,485 1,369 -4% +16% 434 415 158 18
Slide 17: Platform-ization of AI to develop from Asia
We believe that “platform-ization” of AI technology will develop from Asia, where expansion of smart cities is expected U.S. companies are hesitant towards the usage of AI in physical spaces Withdrawal from face recognition In Japan, legislation for business (Jun, 2020) AI utilization and it’s imple
Slide 19: FY2022 Q2 highlights and key strengths
FY2022 Q2 ended Jun. highlights and key strengths Topline growth High profitability Large sales organization Rapid growth benefiting from Maintaining high GP margins in Uncommon AI Co. building out a strong AI market tailwinds combination with increasing sales sales team with over 80 personnel Net s
Slide 20: FY2022 Q2 consolidated Statement of Income
FY2022 Q2 ended Jun. consolidated Statement of Income FY2021 FY2022 Q1-Q2 Q1-Q2 Increase Increase (million JPY) ended Jun. ended Jun. Value Percentage YoY Net sales 490 1,153 663 +135.3% Gross profit 406 770 364 +89.7% % of net sales 82.9% 66.8% EBITDA 126 -87 -213 - EBITDA% 31.0% -7.6% Operating pr
Slide 21: FY2022 quarterly forecast (Illustrative)
FY2022 ending Dec. quarterly forecast (Illustrative) Net Sales Gross Profit EBITDA (million JPY) (million JPY) (million JPY) Fiscal Fiscal Fiscal year total 3,200 year total 2,100 year total 350 1,400 1,400 1,400 Completion of business restructuring in sight, aiming to achieve EBITDA 1,200 1,200 1,2
Slide 22: Quarterly net sales
Quarterly net sales – Steady sales growth since company inception. Business scale expansion through both organic and M&A activity (million JPY) +217% 640 513 288 294 251 226 184 202 163 164 126 91 62 33 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY2019 FY2020 FY2021 FY2022 (2nd term) (3rd term) (4th
Slide 23: Quarterly gross profit
Quarterly gross profit – Gross profit is second most important management indicator after sales, showing steady expansion Gross profit margin (% of net sales) 64% 65% 64% 81% 93% 93% 88% 81% 87% 77% 81% 64% 69% 65% +166% (YoY comparison) 418 351 250 237 203 152 152 162 157 144 102 58 40 21 Q1 Q2 Q3
Slide 24: Consolidated full-time employees
Consolidated full-time employees*1 • Organizational expansion particularly across engineers and sales personnel • Engineers account for approx. 70% of the company's workforce on a stand-alone basis, where we employ talented AI engineers from around the world 168 52 38 42 34 25 18 ’19/6 ’19/12 ’20/6
Slide 25: Group operates 14 offices nationwide
Neural Pocket Group operates 14 offices nationwide – We hold the necessary infrastructure to enable smart cities across the country Neural Pocket Inc. locations Neural Marketing Inc.*2 locations Niigata Branch Nagoya Branch Sendai Branch Neural Marketing Inc.*2 Osaka Sales HQ Tokyo HQ*1 Hiroshima Br
Slide 26: Vast potential locations for Digi-Solution Services
There is vast potential of locations for Digi-Solution Services to be installed Figures represent # of locations within Japan Apartments Office Buildings Restaurants Large Scale Retail Stores ~200K ~10K ~700K ~130K Hotels Hospitals, Pharmacies Airports Fitness Gyms ~50K ~70K ~100 ~6K Electricity Dis
Slide 27: Consolidation of NETTEN and Focus Channel into Neural Marketing
Consolidation of NETTEN Inc. and Focus Channel Inc. to form Neural Marketing Inc., a sales company for AI/ signage systems Through the integration*1 of the two companies, they will expand each other's business areas and accelerate the pursuit of synergies as a comprehensive sales company for AI and
Slide 28: Neural Pocket Group structure
Neural Pocket Group structure Ownership 100% 100% Neural Marketing Inc.*1 Neural Engineering Inc. (previously NETTEN Inc. & Focus Channel Inc.) Established Sep 1st, 2022*2 Oct 1st, 2021 Business Sales of AI systems, dev./ manufact./ sales of Installation, operation, and development of overview LED s
Slide 29: Selection of fixed assets in preparation for future growth
Selection of fixed assets in preparation for future growth Background of fixed asset selection Impairment impact to PL (Illustrative) 【Focus Channel biz fixed assets: 560 M JPY】 (million JPY) • Regarding Focus Channel, installation base and Change to operating profit sales has continued to grow and
Slide 30: FY2022 revised consolidated forecast
FY2022 ending Dec. revised consolidated Net income for this fiscal year has been revised by 624 million yen due to a one-time impairment of goodwill and other items. The forecast for operating income and above is unchanged. The one-time impairment will reduce the amortization burden in following yea
Slide 31: FY2022 Q2 consolidated balance sheet
FY2022 Q2 ended Jun. consolidated balance sheet (million JPY) FY2022 As of Jun 30 Total current assets 2,005 Cash and cash assets*1 1,567 Total non-current assets 1,915 Total assets 3,921 Total liabilities 3,510 Interest bearing debt 3,080 Total net assets 411 *1 Includes 194 million yen of NETTEN's
Slide 32: Changes in service domains
Changes in service domains Synergies across existing service domains were being created through the consolidation of NETTEN Inc. and Focus Channel Inc. Going forward, we plan to reorganize and disclose service domains in a more segmented manner. Before (prior to Q2 2022) Digi-Solution Service AI Med
Slide 33: Quarterly net sales breakdown by service domain
Quarterly net sales breakdown by service domain 217% 640 Digi-Solution Services*1 70 Lifestyle Services 513 34 288 294 570 251 56 66 32 226 479 202 20 184 163 164 65 32 126 22 25 91 31 219 232 228 206 62 32 141 139 152 137 33 34 95 59 30 28 3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY2019 FY2020 F
Slide 34: Org structure from Aug. 10, 2022
Org structure from Aug. 10, 2022 • To enable high business growth, org change was implemented from Jan. to allow for different business divisions to pursue scale independent of each other • Also established a solid executive team to lead each of the divisions Board of Directors CEO Technology Financ
Slide 35: Executive team and Board of Directors
Executive team and Board of Directors (as of Aug. 10th) Executive team (as of Aug. 10th, 2022) Role Name Previous role (only if there are changes) CEO Roi Shigematsu - Technology Development Div. Head Yuichi Sasaki - Financial Management Div. Head Ryosuke Tane - Marketing Div. Head (NEW) Masaaki Yam
Slide 36: Our management team
Our management team Name Career overview Former Partner at McKinsey, working in 11 countries including Japan, Germany, and the U.S as CEO leader in IoT and AI field. Founded Neural Pocket in January 2018 with the goal of realizing the Roi Shigematsu digitization of the real world through AI. He hold
Slide 37: Increasing diversity in shareholders since public listing
Increasing diversity in shareholders since public listing General shareholders/ floating shares*1 4.6% VC/ Angel 18.8% investors*2 27.3% 24.4% Total issued Total issued Total issued 13,784,000 14,013,200 12.6% 14,300,199 shares shares shares 63.7% 9.0% 68.6% 71.0% Management*3 Aug. 20th, 2020 Dec. 3
Slide 39: Digi-Solution Services: Case studies from around the country
Digi-Solution Services: Case studies from around the country Camera-based vacancy monitoring License plate detection .. of moving In-store customer count and View rate, people flow, viewer attribute system at large shopping facility vehicles to measure traffic volume customer traffic detection built
Slide 40: Expansion of cumulative unit installations of Digi-Solution Services
Expansion of cumulative unit installations of Digi-Solution Services 874 units 211 DigiLook*1 644 units 106 406 units 485 SIGN DIGI*2 384 185 units 301 103 121 units units 95 DigiPark/ 97 154 178 DigiFlow 87 90 105 etc. 16 24 ’21 Q1 ’21 Q2 ’21 Q3 ’21 Q4 ’22 Q1 ’22 Q2 *1 LED signages installed by NET
Slide 41: Digi-Solutions adopted in many smart city projects
Digi-Solutions services are being adopted in many smart city development projects Sendai City Muroran City Analysis of people flow in urban centers, and Promoting regional revitalization efficiency of shelter operations through optimization of urban policy and tourism Sugamo District SMARK Isezaki I
Slide 42: DigiLook: Top share in Japan with 10,000+ LED signage installations
DigiLook: Top share in Japan with more than 10,000 LED signage installations #1 installations with more than 10,000 signages nationwide ➢ Unparalleled installation track record Experience in a wide variety of industries, including large corps, government offices, commercial facilities, and merchant
Slide 43: Focus Channel: installation base doubled since acquisition
Focus Channel: Rapid expansion where installation base has doubled since acquisition Examples of apartment signages in operation Reiwa Travel Inc., NEWT Willgate Inc., Willgate M&A Inc. Wang’s Garden Corporation (Ad agency: Raksul Inc.) Broadcasting lifestyle-oriented advertising content along with
Slide 44: Focus Channel: Media overview
Focus Chanel: Media overview Reach approx. 190K affluent consumers/ residents in the metropolitan area ➢ # of views (Impressions) Stable reach even during Covid ➢ View frequency Located in living spaces and repeatedly views by all residents (1.5 million estimated monthly view count per program) ➢ Ta
Slide 45: Focus Channel: List of apartments installed (1/3)
Focus Channel: List of apartments installed (1/3) The Tokyo Towers (Mid Tower) Lexington Square Shirokane-Takanawa Gala Station Iwamotocho North Dames Toyocho The Tokyo Towers (Sea Tower) Central Crib Roppongi 1 Premiere Ichibancho Deems Toyocho II Kachidoki The Tower Central Crib Roppongi 2 KDX Dai
Slide 46: Focus Channel: List of apartments installed (2/3)
Focus Channel: List of apartments installed (2/3) Castalia Shinjuku Dames Shinagawa Minami-Oi Park Habio Akihabara Est. West Park Tower Ikebukuro Residia Nakaochiai (Building C) Dames Oimachi The Park Habio Ueno Residence Comforia Higashi Ikebukuro WEST Residia Ichigaya-Yakuoji Dames Shinagawa Minam
Slide 47: Focus Channel: List of apartments installed (3/3)
Focus Channel: List of apartments installed (3/3) Cosmo High Ceresa YOKOHAMAEAST Comforia Omiya Hill Heights Hiyoshi Park Homes Shiki Station First Cosmo Sandic Residence Okurayama City Tower Ageo Ekimae Tokyu Dwell Yokohama Hillside Garden Comforia Narimasu Greenside Cosmo Hills Isogodai Bland's To
Slide 48: Appearances at seminars and events sponsored by public organizations
Appearances at seminars/ events sponsored by public organizations AI technology ▪ Macnica: Possibilities in Retail for Image Recognition AI Speaker on Image Recognition AI ▪ AI Innovation AWARD2022 “Future envisioned by Smart Cities” ▪ HONGO AI 2021 Judge ▪ Soft Bank World 2021 Presenter ▪ Japan Cou
Slide 49: Membership in public and private organizations
Membership in many public & private organizations related to AI and smart cities Smart City related Ministry of Land, Infrastructure, Transport and Tourism Smart City Public-Private Partnership Platform Kamakura City Smart City Public Private Sector Research Association MaaS Social Implementation Pr
Slide 51: AI industry undergoing industrialization; company moving to next stage
The AI industry is undergoing industrialization, and our company is moving to the next stage Industrialization • Winners/ losers emerge within Edge Dawn of technology technologies and de facto standards formed • Edge AI technology began to take • Edge technologies are to be off in 2018 “platform-ize
Slide 52: 3-year business growth target
3-year business growth target We aim to achieve growth by leveraging our core edge AI technologies and services, and acquiring related services in Japan and overseas. In addition to organic business growth, we plan to execute roughly two M&As per year creating synergies that will contribute to busin
Slide 54: Disclaimer
Disclaimer Handling of the material This document contains forward-looking statements. These statements are based solely on the information available at the time the statements were made. Furthermore, such statements are not guarantees of future results and are subject to risks and uncertainties. Ac

Neural Pocket — Q2 2022 Earnings Presentation on 6ix

Neural — Neural Pocket — Q2 2022 Earnings Presentation

Slide 1: Financial Results Briefing Material FY2022 Q2

Slide 2: Four and a half years after founding, a leading edge AI company

Slide 3: Business strategy and company highlights

Slide 4: Agenda

Slide 5: AI industry expected to grow to an overwhelming market size

Slide 6: Shifting from selling AI tech to selling AI-enabled services

Slide 7: AI technology is rapidly evolving

Slide 8: Adoption of edge AI accelerating at global leading companies

Slide 9: Edge processing is rapidly expanding

Slide 10: We enable smart cities with edge AI

Slide 11: Neural Platform: environment for AI software development and operations

Slide 12: Proprietary AI libraries and technologies

Slide 13: AI libraries operate on a variety of technical standards

Slide 14: Established position as an edge AI platformer

Slide 15: Accelerating growth since inception

Slide 16: Smart city AI is the largest and fastest growing segment at SenseTime

Slide 17: Platform-ization of AI to develop from Asia

Slide 18: Agenda

Slide 19: FY2022 Q2 highlights and key strengths

Slide 20: FY2022 Q2 consolidated Statement of Income

Slide 21: FY2022 quarterly forecast (Illustrative)

Slide 22: Quarterly net sales

Slide 23: Quarterly gross profit

Slide 24: Consolidated full-time employees

Slide 25: Group operates 14 offices nationwide

Slide 26: Vast potential locations for Digi-Solution Services

Slide 27: Consolidation of NETTEN and Focus Channel into Neural Marketing

Slide 28: Neural Pocket Group structure

Slide 29: Selection of fixed assets in preparation for future growth

Slide 30: FY2022 revised consolidated forecast

Slide 31: FY2022 Q2 consolidated balance sheet

Slide 32: Changes in service domains

Slide 33: Quarterly net sales breakdown by service domain

Slide 34: Org structure from Aug. 10, 2022

Slide 35: Executive team and Board of Directors

Slide 36: Our management team

Slide 37: Increasing diversity in shareholders since public listing

Slide 38: Agenda

Slide 39: Digi-Solution Services: Case studies from around the country

Slide 40: Expansion of cumulative unit installations of Digi-Solution Services

Slide 41: Digi-Solutions adopted in many smart city projects

Slide 42: DigiLook: Top share in Japan with 10,000+ LED signage installations

Slide 43: Focus Channel: installation base doubled since acquisition

Slide 44: Focus Channel: Media overview

Slide 45: Focus Channel: List of apartments installed (1/3)

Slide 46: Focus Channel: List of apartments installed (2/3)

Slide 47: Focus Channel: List of apartments installed (3/3)

Slide 48: Appearances at seminars and events sponsored by public organizations

Slide 49: Membership in public and private organizations

Slide 50: Agenda

Slide 51: AI industry undergoing industrialization; company moving to next stage

Slide 52: 3-year business growth target

Slide 53: Company mission: Update the world for a better tomorrow

Slide 54: Disclaimer

Slide 55: Copyright © Neural Pocket Inc. All Rights Reserved.