Slide 1: Financial Results for 1Q of Fiscal Year Ending March 31, 2016
July 31, 2015 (TSE 1st Section: 8698) Financial Results for 1Q of Fiscal Year Ending March 31, 2016 This is an English translation of Japanese presentation material prepared in connection with the disclosure of the financial results of Monex Group, Inc. It includes information derived from the conso
Slide 2: Our Business Principles
Our Business Principles "MONEX" stands for the future of finance, one step advanced from "MONEY" The Monex Group is aspiring to empower traders and investors worldwide with best of breed technology, education, service and financial professionalism to provide access to top financial markets globally
Slide 3: Table of Contents
Table of Contents Our Business Principles p. 1 Table of Contents p. 2 I. Highlights p.3 - p.7 II. Consolidated Performance p.8 - p.22 III. Business Update p.23 - p.29 IV. Mid- & Long-term Strategy “Global Vision” p.30 - p.33 V. Corporate Governance p.34 - p.35 Appendix. Group Overview p. 36 - p. 46
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-term Strategy “Global Vision” V. Corporate Governance Appendix. Group Overview 3
Slide 5: Highlight: long-term efforts in globalization and system internalization
Highlight Management’s recognition of the current situation: Long-term efforts in globalization and system internalization will start paying off this term Introducing a trading platform utilizing US subsidiary’s technology Revenue increase this coming autumn in Japan - In addition to stable customer
Slide 6: Consolidated performance of 1Q FYE Mar. 2016
Highlight ■Consolidated performance of 1Q FYE Mar. 2016 Up in revenue and profit compared to 4Q FYE Mar. 2015 / 1Q FYE Mar. 2015 ◆Total operating revenue after deducting financial expenses and Quarterly profit attributable to owners of the Company (JPY million) Total operating revenue after deductin
Slide 7: Highlights (1Q FYE Mar. 2016)
Highlights (1Q FYE Mar. 2016) ■Japan segment - Brokerage commissions increased in a booming market. Daily average trading value of individual investors in the two stock exchanges increased 7% QoQ; Monex, Inc.’s brokerage commissions increased 7% QoQ as well - Customer assets recorded JPY 3.8 trillio
Slide 8: Pursue increasing corporate value and market cap
Monex Market Cap (graphic) Pursue increasing our corporate value and market cap by making US segment profitable during FYE Mar. 2016 and through steady progress of our mid-and long-term strategy, “Global Vision” 2,000 Potential corporate value generated from growth strategy incl. Global Vision 1,800
Slide 9: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-term Strategy “Global Vision” V. Corporate Governance Appendix. Group Overview 8
Slide 10: QoQ Comparison: Consolidated performance
QoQ Comparison (3 months) Consolidated performance Total operating revenue after deducting financial expenses up 5%. Bottom-line profits up 7% （JPY million） 4Q FYE Mar. 2015 1Q FYE Mar. 2016 Change Variance Analysis (Jan. - Mar. 2015) (Apr. - Jun. 2015) (%) Total operating revenue after Analysis of
Slide 11: QoQ Comparison: Segment performance
QoQ Comparison (3 months) Consolidated performance Revenue up in US. Increase in revenue and profit to turn into the black in China (JPY million) Japan US China 2015/3 2016/3 Change 2015/3 2016/3 Change 2015/3 2016/3 Change 4Q 1Q (%) 4Q 1Q (%) 4Q 1Q (%) Total operating revenue after 8,198 8,592 4.8％
Slide 12: Japan: Revenue up due to increased stock trading value and margin balance
QoQ Comparison (3 months) Analysis: Japan segment Operating revenue Japan：Revenue up due to increased stock trading value and margin balance ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses (compared to Jan. – Mar. 2015) （JPY million） （JPY million） Total 9
Slide 13: Japan: SG&A temporarily up due to parallel operation of systems
QoQ Comparison (3 months) Analysis: Japan segment SG&A Japan：SG&A temporarily up due to parallel operation of new / old backbone brokerage systems ◆ Increase / decrease analysis of SG&A (compared to Jan. – Mar. 2015) （JPY million） Total （JPY million） +8.9％（+474） 6,000 5,774 5,300 Others 5,000 （+36）
Slide 14: US: Net interest income improvement exceeded commission decrease
QoQ Comparison (3 months) Analysis : US segment Operating revenue (USD) US：Net interest income improvement exceeded commission revenue decrease ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses (compared to Jan. – Mar. 2015) （USD thousand） （USD thousand） 40
Slide 15: US: SG&A increased mainly due to stock compensation
QoQ Comparison (3 months) Analysis : US segment SG&A (USD) US：Increased mainly due to stock compensation ◆ Increase / decrease analysis of SG&A (compared to Jan. – Mar. 2015) （USD thousand） （USD thousand） Total 40,000 39,097 +7.6％（+2,745） 36,351 35,000 Others 9,693 8,840 （+853） 30,000 Advertising Ad
Slide 16: YoY Comparison: Consolidated performance
YoY Comparison (3 months) Consolidated performance Total operating revenue after deducting financial expenses up 37%. Bottom-line tripled (JPY million) 1Q FYE Mar. 1Q FYE Mar. 2015 2016 Change Variance Analysis (%) (Apr. - Jun. 2014) (Apr. - Jun. 2015) Total operating revenue after Analysis of Japan
Slide 17: YoY Comparison: Segment performance
YoY Comparison (3 months) Segment performance Revenue and profit up in Japan. Revenue up in US. China turned profitable (JPY million) Japan US China 2015/3 2016/3 Change 2015/3 2016/3 Change 2015/3 2016/3 Change 1Q 1Q (%) 1Q 1Q (%) 1Q 1Q (%) Total operating revenue after 6,246 8,592 37.6％ 3,148 4,19
Slide 18: Japan: Revenue up due to increased trading volume of stock and FX
YoY Comparison (3 months) Analysis: Japan segment Operating revenue Japan：Revenue up due to increased trading volume of stock and FX ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses (compared to Apr. – Jun. 2014) （JPY million） （JPY million） 9,000 8,592 Tot
Slide 19: Japan: SG&A temporarily up (YoY)
YoY Comparison (3 months) Analysis: Japan segment SG&A Japan：SG&A temporarily up due to parallel operation of new / old backbone brokerage systems ◆ Increase / decrease analysis of SG&A (compared to Apr. – Jun. 2014) （JPY million） Total （JPY million） +21.3％（+1,014） 5,774 6,000 Others 5,000 4,761 （+2
Slide 20: US: Interest rate swap and bank change pay off
YoY Comparison (3 months) Analysis : US segment Operating revenue (USD) US: Execution of interest rate swap and change of a bank to deposit customer asset pay off ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses (compared to Apr. – Jun. 2014) （USD thousand
Slide 21: US: SG&A increased mainly due to stock compensation (YoY)
YoY Comparison (3 months) Analysis : US segment SG&A (USD) US：Increased mainly due to stock compensation ◆ Increase / decrease analysis of SG&A (compared to Apr. – Jun. 2014) （USD thousand） （USD thousand） Total 40,000 39,097 +9.1％（+3,273） 35,824 35,000 11,971 Others 30,000 11,546 （+425） Amortization
Slide 22: Summary of Statement of Financial Position
Summary of Statement of Financial Position The difference between “capital” and “non-current assets” is a capital source for investment and shareholders’ return ◆ Summary of consolidated statement of financial position as of June 30, 2015 Assetsz Liabilities (*1) Non-current assets JPY 1,110.4B JPY
Slide 23: Shareholders' return policy
Basic policy for Shareholders’ return policy Aim to achieve 75% of total return ratio (*1) on a multi-year basis and raised the lower limit of dividend to 2% of DOE ◆Summary of the shareholders’ return policy ◆Dividend per share and total return ratio Monex has changed the shareholders’ return polic
Slide 24: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-term Strategy “Global Vision” V. Corporate Governance Appendix. Group Overview 23
Slide 25: Business Update Japan Segment (1)
Business Update Japan Segment (1) We have solid customer base of investors who prefer asset building. Maintained stable brokerage commission share ◆Customer assets per account ◆Stock brokerage commission share （JPY Million） 4 35% Monex SBI Rakuten Matsui Kabu.com 3 30% 2 1 25% 0 200 6/3 200 7/3 200
Slide 26: Business Update Japan Segment (2)
Business Update Japan Segment (2) Introduce new Japanese stock trading platform this autumn, aiming to acquire “traders” and increase commission share By introducing a new Japanese equity trading platform, we aim to acquire traders, in addition to the conventional customer base of investors ◆Margin
Slide 27: Business Update US Segment (1)
Business Update US Segment (1) Quarterly EBITDA became positive for 2 quarters in a row; Next target is to get the bottom-line black ■Revenue increase ◆EBITDA 1. Improved USD 15M / year in net financial income (USD million) 5 (See detail on p.27) 2. Revenue from B2B business USD 2M/ year Offer tradi
Slide 28: Business Update US Segment (2)
Business Update US Segment (2) Customer assets, a source of interest income, is steadily increasing. Net financial income improved by initiatives Interest rate swap to ensure a part of future interest income from ：USD 8M / year → USD 1.8M for 1Q FYE Mar. 2016 customers’ deposit (Dec. 2014) Change of
Slide 29: Business Update US Segment (3)
Business Update US Segment (3) Brokerage commission down due to much lower volatility despite stable increase in the number of active accounts A 1pt increase in VIX will bring additional USD 3M revenue (based on a regression analysis of commission data during Jan. 2009- Jun. 2015) VIX decreased fr
Slide 30: Business Update China Segment
Business Update China Segment Online broker business in H.K. keeps profitability. Created new revenue stream in PRC ■ Online broker business in H.K. (Monex Boom Securities Group) keeps profitability - DARTs largely increased due to brisk Hong Kong market for 1Q FYE Mar. 2016 - Customer assets steadi
Slide 31: IV. Mid- & Long-term Strategy Global Vision
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-term Strategy “Global Vision” V. Corporate Governance Appendix. Group Overview 30
Slide 32: Mid- & Long-term strategy Global Vision
Mid- & Long-term strategy “Global Vision” Globally pursue “mid- and long-term revenue growth” and “fixed-type cost reduction” ■ Mid- and long-term revenue growth - Develop and offer to retail investors differentiated products & services, such as the group-developed global trading platform - Diversif
Slide 33: Timeline of mid- & long-term strategy Global Vision
Timeline of mid- & long-term strategy “Global Vision” Completed project FYE Mar. 2013 FYE Mar. 2014 FYE Mar. 2015 FYE Mar. 2016 FYE Mar. 2017 FYE Mar. 2018 Ongoing project ●Nov. 2012 Upgraded U.S. equity service for Japanese customers Revenue Growth ●Dec. 2013 Started “Tokutei” accounts(*) for Japan
Slide 34: Cost-cutting plan in Global Vision
Cost-cutting plan in Global Vision Cost increase / decrease prospect from FYE Mar. 2013 Forecast as of June 30, 2015, for fixed-type cost increases / decreases in consolidated SG&A, assuming FYE Mar. 2013 as the baseline Parallel operation of the new and old Japanese main brokerage systems *transfer
Slide 35: V. Corporate Governance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-term Strategy “Global Vision” V. Corporate Governance Appendix. Group Overview 34
Slide 36: Corporate Governance
Corporate Governance Establish global-standard corporate governance practices and fair disclosure / dialogue with shareholders and investors ■Highly effective executive management ■Respect for shareholders’ rights monitoring system 1. Adoption of “company with three committees” structure 1. Timely a
Slide 37: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-term Strategy “Global Vision” V. Corporate Governance Appendix. Group Overview 36
Slide 38: Group Overview – streams for Monex value
Group Overview – 3 streams for Monex value Three retail brands: “Monex”, “TradeStation”, and “BOOM” －Oki Matsumoto, a former partner at Goldman Sachs, established Monex and led the online brokerage industry as a pioneer in Japan Brand － Japan: “Monex” promotes long & diversified investment and is su
Slide 39: Group Overview – Continuous growth over years
Group Overview – Continuous growth over 15 years Japan: 1.55M accounts, US: 67K accounts, HK: 10K accounts. Monex has global customer base Make efforts to continuously grow, with the online brokerage business for retail investors as our core business ◆Consolidated Operating Revenue (JPY million)
Slide 40: Revenue by region and business; SG&A by segment
Group Overview－Revenue is 60% in Japan and 40% in U.S. Employees is 30% in Japan and 70% in U.S and China ◆Operating revenue by region and by business ◆SG&A by segment and by cost items Others 2% Others 5% Financial income 1. Equities Commissions 2. System 10% FX 3% 30% paid 11% related costs China
Slide 41: Group Overview – Japan segment
Group Overview – Japan segment From the beginning of our business, we have promoted “long-term diversified investments” to be appreciated by investors. From now, we will also strive to acquire active traders Highest active account ratio and one of the best for customers’ assets per account among m
Slide 42: Group Overview – US segment
Group Overview – US segment Started as a system developer. TradeStation internally develops trading platform highly regarded by active traders ■Active traders are main customers. Revenue per account is at a higher level when compared to peers ◆Commission per account comparison (FYE Mar. 2015 (12 mon
Slide 43: Group Overview – China segment
Group Overview – China segment Aiming to establish online brokerage business in PRC by pursuing several plans in Hong Kong and PRC ■Keep profitability of Monex Boom Securities Group in Hong Kong With the effect of Shanghai-Hong Kong Stock Connect, revenue increase is expected in the future ■Jointl
Slide 44: Monex Group structure
Monex Group (As of July 31, 2015) Listed Holding Company [Japan] [U.S./Europe] [China] Online Securities Company Monex International Limited Holding Company in Hong Kong Online Securities Company TradeStation Group, Inc. Holding Company in the U.S. Monex, Inc. Online Securities Company Comprehensive
Slide 45: Introduction of Monex Group and main subsidiary companies
Introduction of Monex Group and main subsidiary companies ■ Monex Group, Inc. (Tokyo, Japan) TSE 1st Sec. Code: 8698 ■ TradeStation Group (HQ in Florida, U.S.) - Chairman, Representative Executive Officer & CEO: Oki Matsumoto Online securities group with award-winning trading technology development
Slide 46: History of Monex Group
History of Monex Group Japan U.S. China (Hong Kong) 1982 - TradeStation Technologies, Inc. formed as Omega Research, Inc. 1997 - TradeStation stock listed on NASDAQ - Boom Securities (H.K.) Limited was founded (now Monex Boom Securities (H.K.) Limited, being the first in Asia Pacific to launch Inter
Slide 47: Investors' Guide
Investors’ Guide ■Pursue returns to shareholders through ROE improvement ■Shareholders & indicators per share ◆ Our basic policy for shareholders’ return ◆Major shareholders and shareholder breakdown To provide returns to shareholders based on our business (as of March 31, 2015) Securities companies