Slide 1: Financial Results for 2Q of Fiscal Year Ending March 31, 2016
October 29, 2015 (TSE 1st Section: 8698) Financial Results for 2Q of Fiscal Year Ending March 31, 2016 This is an English translation of Japanese presentation materials prepared in connection with the disclosure of the financial results of Monex Group, Inc. It includes information derived from the c
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 VI. Others p.36 - p.37 Appendix. Group
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Corporate Governance VI. Others Appendix. Group Overview 3
Slide 5: Highlights: Management's recognition of the current situation
Highlights Management’s recognition of the current situation: Long-term efforts in globalization and system internalization will start paying off this term Achieved profitability in 2Q - Achieved quarterly profitability for the first time since the acquisition of TradeStation in June 2011. Turned Po
Slide 6: Consolidated performance of 2Q FYE Mar. 2016
Highlights ■Consolidated performance of 2Q FYE Mar. 2016 Increase in revenue and profit compared to QoQ ◆Total operating revenue after deducting financial expenses and quarterly profit attributable to owners of the Company (JPY million) Total operating revenue after deducting financial expenses 15,0
Slide 7: Highlights (2Q FYE Mar. 2016, 3 months)
Highlights (2Q FYE Mar. 2016(3 month)) - Daily average trading value of retail investors in the two stock exchanges decreased 7% QoQ, whereas Monex, Inc.’s stock brokerage commissions remained flat. Japan Commissions for futures and options increased 38% QoQ, and total brokerage segment commissions
Slide 8: Pursue increased corporate value and market cap
Monex Market Cap (graphic) Pursue increased corporate value and market cap by making US segment more profitable and through steady progress of our mid- and long-term strategy, “Global Vision” 1,600 Potential corporate value generated Online brokerage from growth strategy incl. Global Vision business
Slide 9: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Corporate Governance VI. Others Appendix. Group Overview 8
Slide 10: Total operating revenue up 4%. Bottom-line profits up 5%
QoQ Comparison (3 months) Consolidated Performance Total operating revenue after deducting financial expenses up 4%. Bottom-line profits up 5% （JPY million） 1Q FYE Mar. 2016 2Q FYE Mar. 2016 Change Variance Note (Apr. - Jun. 2015) (Jul. - Sep. 2015) (%) Total operating revenue after Analysis of Japa
Slide 11: US turned profitable due to revenue increases
QoQ Comparison (3 months) Consolidated Performance US turned profitable due to revenue increases. All segments achieved profitability (JPY million) Japan US China 2016/3 2016/3 Change 2016/3 2016/3 Change 2016/3 2016/3 Change 1Q 2Q (%) 1Q 2Q (%) 1Q 2Q (%) Total operating revenue after deducting fina
Slide 12: Japan: Revenue up due to increased futures and FX trading volumes
QoQ Comparison (3 months) Analysis: Japan Segment Operating Revenue Japan：Revenue up due to increased futures and FX trading volumes ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses and cost of sales (compared to Apr. – Jun. 2015) （JPY million） （JPY millio
Slide 13: Japan: SG&A temporarily increased
QoQ Comparison (3 months) Analysis: Japan Segment SG&A Japan：SG&A temporarily increased ◆ Increase / decrease analysis of SG&A (compared to Apr. – Jun. 2015) （JPY million） Total （JPY million） +1.3％（+74） 5,848 6,000 5,774 Others - Information Service fee: JPY -55M （-0） 5,000 1,989 1,989 Rental and ma
Slide 14: US: Revenue up due to increased volatility
QoQ Comparison (3 months) Analysis : US Segment Operating Revenue (USD) US：Revenue up due to increased volatility and improved net financial income ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses and cost of sales (compared to Apr. – Jun. 2015) （USD thous
Slide 15: US: SG&A decreased mainly due to stock compensation
QoQ Comparison (3 months) Analysis : US Segment SG&A (USD) US：SG&A decreased mainly due to decrease in stock compensation ◆ Increase / decrease analysis of SG&A (compared to Apr. – Jun. 2015) （USD thousand） （USD thousand） Total 40,000 39,097 -5.7％（-2,235） 36,862 35,000 Others 9,693 9,011 （-682） - In
Slide 16: Operating income up 151%. Bottom-line up 3.9 billion yen
YoY Comparison (6 months) Consolidated Performance The amount equivalent to operating income up 151%. Bottom-line up 3.9 billion yen (JPY million) 2Q FYE Mar. 2015 2Q FYE Mar. 2016 Change Variance Note (Apr. - Sep. 2014) (Apr. - Sep. 2015) (%) Total operating revenue after Analysis of Japan segment:
Slide 17: All segments turned profitable
YoY Comparison (6 months) Segment Performance All segments turned profitable due to increaed revenue in Japan, US and China. (JPY million) Japan US China 2015/3 2016/3 Change 2015/3 2016/3 Change 2015/3 2016/3 Change 2Q 2Q (%) 2Q 2Q (%) 2Q 2Q (%) Total operating revenue after deducting financial exp
Slide 18: Japan: Revenue up due to increased stock and FX trading volumes
YoY Comparison (6 months) Analysis: Japan Segment Operating Revenue Japan：Revenue up due to increased stock and FX trading volumes ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses and cost of sales (compared to Apr. – Sep. 2014) （JPY million） （JPY million）
Slide 19: Japan: SG&A temporarily up due to parallel system operation
YoY Comparison (6 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. – Sep. 2014) （JPY million） （JPY million） Total +20.4％（+1,971） 12,000 11,623 - Along with the inc
Slide 20: US: Revenue up due to increased volatility and net financial income
YoY Comparison (6 months) Analysis : US Segment Operating Revenue (USD) US：Revenue up due to increased volatility and improved net financial income ◆ Increase / decrease analysis of total operating revenue after deducting financial expenses and cost of sales (compared to Apr. – Sep. 2014) （USD thous
Slide 21: US: SG&A decreased mainly due to depreciation expense
YoY Comparison (6 months) Analysis : US Segment SG&A (USD) US：SG&A decreased mainly due to depreciation expense ◆ Increase / decrease analysis of SG&A (compared to Apr. – Sep. 2014) （USD thousand） （USD thousand） Total 80,000 76,843 75,958 -1.2％（-885） 70,000 Others - Ad expense USD -1,381K （-841） In
Slide 22: Summary of Statement of Financial Position
Summary of Statement of Financial Position The difference between “capital” and “non-current assets” is the source of funds for investments and shareholders’ return ◆ Summary of consolidated statement of financial position as of September 30, 2015 Assets Liabilities (*1) Non-current assets JPY 998.4
Slide 23: Basic Policy Regarding Shareholders' Return
Basic Policy Regarding Shareholders’ Return Aim to achieve a total return ratio (*1) of 75% on a multi-year basis. JPY 7.0 interim dividend per share for FYE Mar. 2016 ◆Summary of the shareholders’ return policy ◆Dividend per share and total return ratio Monex has changed its shareholders’ return po
Slide 24: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Corporate Governance VI. Others Appendix. Group Overview 23
Slide 25: Business Update Japan Segment (1)
Business Update Japan Segment (1) A solid customer base of investors who prefer asset building; Stable brokerage commission share maintained ■Comparison of 5 major online brokers* ◆Customer assets per account ◆Stock brokerage commission share (from 1Q FYE Mar. 2007 to 1Q FYE Mar. 2016) (from 1Q FYE
Slide 26: Business Update Japan Segment (2)
Business Update Japan Segment (2) A new Japanese stock trading platform to be introduced this winter with the aim of acquiring “traders” and commission share By introducing a new Japanese equity trading platform, we aim to acquire traders, in addition to the conventional customer base of investors ◆
Slide 27: Business Update US Segment (1)
Business Update US Segment (1) Quarterly net income positive; Volatility in the US market increasing ◆Quarterly profit attributable to owners of the Company ■Market environment change (USD million) 5 VIX 19.31 (2Q) vs 13.74 (1Q) (*) 0 (Highest level since 1Q FYE March 2013) -5 -10 -15 ■Revenue incre
Slide 28: Business Update US Segment (2)
Business Update US Segment (2) Customer assets, a source of interest income, increasing. Net financial income improved by initiatives Interest rate swap to ensure a part of future interest ：USD 8M / year → USD 2.0M for 2Q 2016/3 vs 2Q 2015/3 income from customers’ deposit (Dec. 2014) Change of the b
Slide 29: Business Update US Segment (3)
Business Update US Segment (3) Brokerage commissions increased due to higher volatility 1pt increase in VIX will bring additional USD 3M revenue per year (based on a regression analysis of commission data during Jan. 2009- Sep. 2015) ◆Number of active accounts (excl. MT4 accounts) ◆VIX and commissio
Slide 30: Business Update China Segment
Business Update China Segment Online broker business in H.K. maintains profitability Continuing the strategy to create a business opportunity in mainland China ■ Quarterly Financial Results of Monex Boom Securities (MBS) - H.K. stock trading value accounts for approx. 60% of the entire trading value
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 VI. Others Appendix. Group Overview 30
Slide 32: Mid- & Long-Term Strategy "Global Vision"
Mid- & Long-Term Strategy “Global Vision” “Mid- and long-term revenue growth” and “Fixed-type cost reduction” by shifting system developments from outsourcing to in-house ■ Mid- and long-term revenue growth Measures Progress and Achievements Launching a trading platform for Japanese active traders T
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: System investment and Depreciation cost in Global Vision
System investment and Depreciation cost in Global Vision Capitalized software reaches a peak in FYE Mar. 2017, when a series of in-house system development will be completed under Global Vision. （JPY millon） (Consolidated) Software and Software in progress (Consolidated) Depreciation cost （JPY milli
Slide 35: V. Corporate Governance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Corporate Governance VI. Others 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: VI. Others
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Corporate Governance VI. Others Appendix. Group Overview 36
Slide 38: Reinforce the management at subsidiary
Reinforce the management at subsidiary Reinforce the management at subsidiary Executive personnel appointment at Monex, Inc. and hiring new executive (as of November 1, 2015) - Oki Matsumoto : (New) Representative Director, Chairman, CEO (Previous) Representative Director, President, CEO Toshihiko K
Slide 39: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Corporate Governance VI. Others Appendix. Group Overview 38
Slide 40: 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 41: Group Overview – Continuous growth over years
Group Overview – Continuous growth over 15 years Japan: 1.58M accounts, US: 67K accounts, HK: 11K accounts. Monex has a global customer base Make efforts to continuously grow, with the online brokerage business for retail investors as our core business ◆Consolidated Operating Revenue (JPY millio
Slide 42: Group Overview – Revenues and employees by region
Group Overview－Revenues: 60% from Japan, 40% from U.S.; Employees: 30% in Japan, 70% in US or 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 1% Chi
Slide 43: Group Overview – Characteristics of each segment
Group Overview – Characteristics of each segment ■Japan segment Strengths Weaknesses Monex, Inc., has established a good-quality customer base primarily Monex, Inc.’s revenue structure is vulnerable to stock market made up of investors interested in building asset portfolios. It has fluctuations bec
Slide 44: Group Overview – Corporate value creation cycle
Group Overview－Corporate value creation cycle Business model United China Provide value to Japan States (Hong Kong) Business investment intended for sustainable stakeholders Global Vision High-quality customer base of Broaden the Capital markets Main 1 million active accounts customer customer Inves
Slide 45: Monex Group
Monex Group (As of October 29, 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 Comprehens
Slide 46: Overview of Monex Group and Main Subsidiary Companies
Overview 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 capab
Slide 47: History of Monex Group
History of Monex Group Japan U.S. China (Hong Kong) 1982 - TradeStation Technologies, Inc. is formed as Omega Research, Inc. 1997 - TradeStation stock lists on NASDAQ - Boom Securities (H.K.) Limited is founded (now Monex Boom Securities (H.K.) Limited), becoming the first in Asia Pacific to launch
Slide 48: 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 September 30, 2015) Monex Group, Inc