Neural Group Inc. · TSE:4056
Neural — FY2023 Earnings Presentation
60 slides from Neural's earnings presentation, Feb 14, 2024
Slide 1: Financial Results Briefing Material FY2023
The above Images were created with the assistance of Bing Image Creator Financial Results Briefing Material FY2023 (ended Dec 31 , 2023) st Neural Group Inc. Translation of original Japanese version February 14th, 2024 Effective June 1, 2023, Neural Pocket Inc. has changed its name to Neural Group I
Slide 2: Full year financial and strategic highlights
FY2024 ending Dec. (6th term) full year financial and strategic highlights Establish AI • 【Business Model】 Established a series of services for "visualizing," services and “broadcasting information," and "monetizing" of physical spaces through edge AI business cameras, digital signages, and ad distr
Slide 3: Agenda
• Company profile and strengths • Business model and FY2023 performance • 2021-23 three-year review and 2024 outlook • Appendix Copyright © Neural Group Inc. All Rights Reserved. 3
Slide 4: Management team intro
Management team intro Founder & CEO Advisor Roi Shigematsu Yutaka Matsuo • Partner, McKinsey & Company, Tokyo Branch, • Professor, Artificial Engineering Research Center, Frankfurt Branch and Chicago Branch, prior to Graduate School of Engineering, The University founding the Company in 2018 of Toky
Slide 5: Company highlights
Company highlights GOOD DESIGN AWARD 2023 • Listed on the • May 2023 • Engineers from 7 • Develop and Growth Market of Technology countries provide numerous the Tokyo Stock Company Sales developing many unique edge AI- Exchange since Growth Ranking proprietary AI enabled services August 2020 Award (
Slide 6: 13 locations across Japan and Southeast Asia
Providing various edge AI services with operations throughout Japan and in Southeast Asia Neural Group (Thailand) Co,. Ltd. Sapporo Branch Across Japan Sendai Branch Southeast Asia Singapore Branch Nagoya Branch 13 locations Neural Marketing, Abeno Harukas Osaka Sales HQ Tokyo HQ Hiroshima Branch Fu
Slide 7: Membership in AI and smart city organizations
Membership in 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 MaaS Social Implementation Promotion Forum Industry groups General Incorporated Association Japan Parkin
Slide 8: Proprietary AI libraries and edge implementation technologies
We develop proprietary AI libraries/ edge-related implementation technologies to enable AI 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 estimation detection
Slide 9: Strengths of Edge AI versus Cloud AI
We develop and provide services that leverage the strengths of Edge AI 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 scale
Slide 10: AI libraries run across standard environments
Our AI libraries operate and run universally across various standard environments (processor, OS, programming language) Processor JETSON Xavier NX JETSON Nano JETSON TX2 OS Language Processor OS Language Copyright © Neural Group Inc. All Rights Reserved. 10
Slide 11: Incorporating latest edge AI into services builds barriers to entry
We incorporate the latest developments in edge AI into our existing services contributing to building further barriers to entry Image Generation AI Multi-tasking AI model AI accuracy research • The latest edge AI technology is rapidly implemented and incorporated into our commercial services through
Slide 12: Agenda
• Company profile and strengths • Business model and FY2023 performance • 2021-23 three-year review and 2024 outlook • Appendix Copyright © Neural Group Inc. All Rights Reserved. 12
Slide 13: Deploying Edge AI in physical spaces
Neural Group is improving the value of physical spaces with edge AI Installed Edge AI cameras in 70+ cities/ locations Visualize Edge AI camera across Japan Capital alliance with Deploying Kyodo News (Dec. ‘23) Edge AI in Leveraging Edge AI to create outdoor media Broadcast Monetize that combines Ed
Slide 14: Edge AI camera installation track record in Japan and overseas
Extensive track record of edge AI camera installations in Japan/ Overseas Thailand Muroran city Traffic analysis at 3 Sendai city Regional revitalization with AI- Lotus's stores Visualization of enabled urban development human flow for facility operations Kashiwa-no-ha smart city Outdoor AI surveill
Slide 15: Social issues addressed with Edge AI services
Social Issues we are addressing with our Edge AI services Local gov’ and Roadside Commercial Logistics facility administration station , SA, PA*1 facility Traffic congestion relief, overtourism • Reduce congestion in tourist • Utilization for SA/PA to address • Parking duration analysis • Visualizat
Slide 16: Market tailwinds: tax break for AI camera usage
Market tailwinds: New government policies encouraging private company AI camera usage via tax break The Order and the Tax Reform Syllabus for 2024 (Dec 22nd 2023, Cabinet decision) (6) With regard to the specific measures for the tax base of fixed property tax and city planning tax for certain house
Slide 17: Congestion monitoring in large commercial facilities
Congestion monitoring in large-scale commercial facilities One camera monitoring more than 100 parking spaces in an outdoor flat parking lot (Camera installed at 25m above ground) Congestion analysis by monitoring parking lot traffic (i.e, enter and exit vehicle count) 1 2 3 Occupancy monitoring Web
Slide 18: Visualizing cumulative parking lot usage
Intuitive tools to visualize cumulative parking lot usage Intuitive visualization of usage and inappropriate parking for each car compartment by creating a heat Actual AI camera footage of parking lot map of cumulative usage Visualization of detailed usage status for individual parking compartments,
Slide 19: Vehicle detection during heavy snowfall
Vehicle detection in during heavy snowfall Operation of AI camera in heavy snowfall region Highly accurate and precise detection even when snow is so thick that only the windows can be seen and most of the vehicle body is hidden. Proven track record in heavy snowfall areas where detection is possibl
Slide 20: Parking duration and availability visualization
Parking duration and availability visualization Visualization of parking time per compartment Automatic inappropriate usage detection サービスエリアA car truck truck truck truck truck Visualize parking duration Capable of classifying vehicle types (e.g., regular vehicles vs trucks) Parking lot avaialabilit
Slide 21: Vehicle movement via license plate detection
Visualization of vehicle movement and stay through license plate detection Reading license plates when vehicle pass detection line Detected data ➢Registered region ➢Device/ camera ID ➢4 digit # ➢Vehicle passing Web user interface with ex- ➢Class # time ➢Hiragana ➢Vehicle direction ternal integration
Slide 22: Real-time people flow analysis and intrusion detection
Real-time people flow analysis, area intrusion detection with immediate notification People flow analysis by line count Visualization of time spent in an area Measurement line Measurement Measurement line Area Multiple lines can be set up to count Multiple areas can be set up to detect people direct
Slide 23: Heat-mapping people flow in physical venues
Visualizing "comfort" of users by heat-mapping the flow of people in physical venues AI camera detection in parks and stores Heat map of facility usage and congestion Supporting effective wayfinding, event displays, and traffic flow design Copyright © Neural Group Inc. All Rights Reserved. 23
Slide 24: AI cameras to replace guidance personnel
施設駐車場の誘導員の省人化を支援 Substituting AI cameras for guiding staff duties at facility exits to alert people of entrance/exit safety and optimize operations BEWARE ✓ Detects exiting vehicles and Pedestrian incoming pedestrians, provides alerts Please proceed with caution AI cameras to potentially replace und
Slide 25: Quantifying advertising effectiveness with AI cameras
Quantifying advertising effectiveness with AI cameras Quantitatively proved that providing information on exhibits in Shurijo Park improves traffic flow and increases average time spent in the park. View of people flow analysis Guidance signage improves entry rate by approx. 10% Guidance signage Vid
Slide 26: People flow analysis in Kawaguchi urban park
埼玉県川口市 都市公園における人流解析 • Conducted long-term analysis of human flow*1 in an urban park adjacent to Kawaguchi Station in Saitama Prefecture in an effort towards realizing Kawaguchi City's "Kawaguchi Station Area Community Development Vision" • In addition to "visualization of daily usage," data measurem
Slide 27: Top share in Japan with 10,000+ installations
Top share in Japan with 10,000+ installation track record ➢ 10,000+ installation track record Experience in a wide variety of industries, including large corps, LED signage government offices, commercial Japan No. 1 facilities, and merchant stores ➢ Unparalleled track record of stable operations Sta
Slide 28: Focus Channel reaches 250,000 affluent residents daily
Focus Channel reaches 250,000 affluent residents in Tokyo every day マンションサイネージ広告 *1 業界1位 *2 AI MEDIA PROVIDER ➢ View count (Impressions) Steady reach regardless of seasons and externalities ➢ View frequency Located in living spaces and repeatedly appealing to all residents (View count per add slot:
Slide 29: Apartment signage media Focus Channel
Apartment signage media “Focus Channel” AI MEDIA PROVIDER Characteristics of apartment signages Total of 200+ buildings, resident population of 100,000+ Number of units in parentheses Mitsubishi Estaet • The Park House Nishi-Shinjuku Tower 60 (954) • The Park House Yokohama- Shinkoyasu Garden (497)
Slide 30: Examples of advertisements broadcast via Focus Channel
Examples of broadcasted advertisements via Focus Channels AI MEDIA PROVIDER (from large to local companies) Copyright © Neural Group Inc. All Rights Reserved. 30
Slide 31: Number of repeat placements by advertisers
AI MEDIA PROVIDER Number of repeat submissions from advertisers increased by 2.6 times after providing advertisers with AI viewership reports Camera Number of repeat placements by advertisers Box Provide AI analysis data to advertisers 2.6x Power Immediate deletion of acquired images to protect user
Slide 32: Advertising operation on large LED display launched Oct 2023
Advertising operation business on large LED display launched Oct. 2023 We launched an ad management business as a dedicated agency (media rep), utilizing our know ledge and sales network in ad sales, ad broadcasting, and operation through our Focus Channel operations Neural responsible of media reps
Slide 33: Large outdoor LED vision system in Sendai
Example of large outdoor LED vision system (Sendai BiVi Vision) Large-scale LED ad board installed at the east exit of Sendai, operated and managed by the company Copyright © Neural Group Inc. All Rights Reserved. 33
Slide 34: Certificate of Appreciation from Miyagi Prefectural Police
Activities at a large outdoor advertising vision in Sendai: Certificate of Appreciation from the local Miyagi Prefectural Police Free airing of traffic advertisements on the large advertising screen at the east exit of Sendai Station, which is installed and operated by the Company The awarding of a
Slide 35: New web business using AI launched May 2023
Growing new web business using AI technology launched in May 2023 Generative Web powered by ChatGPT Function 1 Function 2 Blog generation Auto language translate Function 3 Function 4 Auto reply to reviews SEO automization AI-powered CMS maximizes the effectiveness of web pages with no technical kno
Slide 36: Capital alliances with major corporations
Forming capital alliances with major corporations to allow for collaboration and pursue product-related synergies Sony Corporation Kyodo News Cross Plus Time of announce Apr. 2023 Dec. 2023 Dec. 2023 *Actual capital increase *Actual capital increase -ment in Jan. 2024 in Jan. 2024 Back- • Exchange o
Slide 37: Agenda
• Company profile and strengths • Business model and FY2023 performance • 2021-23 three-year review and 2024 outlook • Appendix Copyright © Neural Group Inc. All Rights Reserved. 37
Slide 38: Business model transition over FY21-23
Succeeded in business model transition over 3 years (FY’21-’23) Fee-based business model Unit-based business model 空間の見える化 空間での情報発信 空間での収益化 AI licensing and contracted development Handful of large corp. Many customers and users Profitability Profitability GP margin 90% • Decline in GP margin 65% gro
Slide 39: Business model transition and reflection on past results
Business model transition and reflection on past results Capabilities acquired Cost competitiveness Completed services allows for scaling without the need for major investment. • With edge AI technology at its core, building out a Started activities to improve profitability comprehensive service gro
Slide 40: Six years of sales growth since inception
Six years of sales growth and business model transformation since company inception Focus on fee-based Business model transformation from fee- biz based to unit-based sales （Contracted development (Sales and provision of and AI license sales） proprietary AI services） (million JPY) +61% CAGR 3,178 2,
Slide 41: FY2023 business results
FY2023 ended Dec. Business results FY2022 FY2023 FY2023 ended Dec. ended Dec. YoY YoY ended Dec. (million JPY) results results value percentage forecast Net sales 2,878 3,178 +299 +10.4% 3,200 Gross profit 1,849 2,063 +213 +11.5% 2,100 % of net sales 64.3% 64.9% 65.6% EBITDA -22 -490 -468 - -440 % o
Slide 42: Streamlining COGS and SG&A through initiatives
While continuing to expand sales, we are simultaneously streamlining COGS and SG&A through various initiatives FY2023 H2 FY2024 H1 FY2024 H2 【R&D】 Platform consolidation, task Sustained impact (i.e., realization of cost savings) automation through R&D SG&A Optimization 【Rent and HQ costs】 Integratio
Slide 43: Progress on SG&A in second half of FY2023
We have already made significant progress in the second half of FY2023 for SG&A spend through optimizing R&D and Sales efforts (million JPY) -56 (Annualized 225M JPY) 728 706 672 販管費 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Results Results Results Plan Plan Plan Plan FY2023 results FY2024 plan (illustrative) Copyright
Slide 44: COGS: strategic partnerships with suppliers
Promoting win-win relationships such as entering strategic partnerships with suppliers and strengthening the company’s cost competitiveness Agreements on procurement/ construction Procurement: Construction: (% of net sales) Strategic Alliance signed on Starting Jan, agreeing on new January 24, 2024
Slide 45: Progressing towards profitability after transition
Post biz model transition, the company is progressing towards profitability Company Biz FY2023 Net sales inception Transition ended Dec. Operating profit Biz centered on Transition from AI service sales providing AI licenses providing AI licenses expansion to large companies to selling AI services (
Slide 46: FY2024 profitability milestones
2024年12月期では今後の持続的な利益体制の構築実現を目指す • Completion of business model transition in FY2023 ended Dec. and established structure to promote business scale expansion without large upfront investments • Generate profits by improving operating efficiency and strengthening cost competitiveness, which we have be
Slide 47: FY2024 forecast (consolidated)
FY2024 ending Dec. Forecast (consolidated) FY2023 FY2024 ended Dec. ending Dec. Increase Increase (million JPY) results forecast Value Percentage Net sales 3,178 3,700 +522 +16.4% Gross profit 2,063 2,550 +487 +23.6% % of net sales 64.9% 68.9% EBITDA -490 180 +670 - % of net sales -15.4% 4.9% Operat
Slide 48: Agenda
• Company profile and strengths • Business model and FY2023 performance • 2021-23 three-year review and 2024 outlook • Appendix Copyright © Neural Group Inc. All Rights Reserved. 48
Slide 49: Building an exciting and inspiring future with AI
Building an exciting and inspiring future with AI Neural Group Inc. The company name "Neural Group" expresses our desire to provide unconventional services that transcend boundaries in a wide range of fields enabled by cutting-edge AI technologies. We will utilize edge AI across both real and virtua
Slide 50: Company overview
Company overview Company name Neural Group Inc. (TYO: 4056) Changed corporate name from Neural Pocket Inc. on Jun 1st, 2023 Established Jan. 22nd, 2018 Representative Roi Shigematsu Listed exchange Tokyo Stock Exchange Growth Market (listed since Aug. 20th, 2020) Headquarters Tokyo Midtown Hibiya, H
Slide 51: Management team
Management team Name Career overview Former Partner at McKinsey, working in 11 countries including Japan, Germany, and the U.S as Representative Director 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 thr
Slide 52: Neural Group subsidiaries
Neural Group (as of Dec 31st, 2023) Ownership 100% 100% 74% Thailand Neural Marketing Inc. Neural Engineering Inc. Neural Group (Thailand) Co., Ltd. Established Aug 20th, 2003*1 Oct 1st, 2021 Nov 4th, 2022 Business Development, fabless Installation, operation, and Sales of AI services and systems ma
Slide 53: Organization structure
Organization structure (as of Dec 31st, 2023) Board of Directors CEO Technology Financial Marketing Digi-Solution Lifestyle Development Management Division Division Division Division Division Thailand Copyright © Neural Group Inc. All Rights Reserved. 53
Slide 54: Capital and business alliances and shareholder composition
Promoting capital and business alliances with major companies while ensuring share liquidity Note: Reflects the capital increase through third-party allotment to Kyodo News and Cross Plus, which was contracted and announced on Dec 22 and paid in on Jan 10, based on the shareholder register as of Dec
Slide 55: Quarterly net sales trajectory per service domain
Quarterly net sales trajectory per service domain Net sales trajectory (million JPY) 991 984 Digi-Solution services 68 170 Lifestyle/ Innovation services 819 772 734 96 640 131 186 603 70 513 95 34 916 821 723 288 294 570 603 586 251 56 66 226 479 508 32 202 184 20 163 164 126 22 25 32 65 62 91 31 2
Slide 56: Consolidated balance sheet
FY2024 ended Dec. consolidated balance sheet Pro forma calculated taking into account the capital increase through the allotment to Kyodo News and Cross Plus Inc. announced on Dec 22, 2023 (million JPY) FY2024 FY2024 ended Dec. 2024 ended Dec. 2024 Considering capital increase*1 As of Dec 31st As of
Slide 57: Digi-Solutions unit installation growth
Digi-Solutions unit installation growth (cumulative) 2,644ユニット 2,286 1,988 1,738 1,835 DigiLook*1 1,531 1,520 1,265 1,254 1,024 980 806 547 406 644 317 301 106 103 121 185 95 105 485 526 496 454 456 473 499 SignDigi*2 87 97 384 90 DigiPark/ 16 24 293 310 154 178 192 229 260 278 DigiFlow etc.*3 Q1 Q2
Slide 58: Promoting edge AI technology with governments and private companies
Promoting edge AI technology with governments and private companies AI technology ▪ G7 Ministerial Conference on Digital Technology in Takasaki, Gunma: Corporate exhibit ▪ Public-private partnership conference for overseas expansion of startups, co-hosted by the Ministry of Economy, Trade and Indust
Slide 59: 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
Slide 60: Copyright © Neural Group Inc. All Rights Reserved.
Copyright © Neural Group Inc. All Rights Reserved. 60