Monex Group, Inc. · TSE:8698
Monex — Q1 FYE March 2017 Earnings Presentation
47 slides from Monex's earnings presentation, Jul 28, 2016
Slide 1: Financial Results for 1Q of Fiscal Year Ending March 31, 2017
July 28, 2016 (TSE 1st Section: 8698) Financial Results for 1Q of Fiscal Year Ending March 31, 2017 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 cons
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. Topics p.34 - p.37 Appendix. Group Overview p.38 - p.46 2
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 3
Slide 5: Management's recognition of the current situation
Management’s recognition of the current situation Facing a decline in retail investors’ risk appetite Completing globalization and system internalization initiatives while Building a profitable structure to cope with environmental changes Enhancement of In response to decreased trading volume in the
Slide 6: Highlights 1Q FYE Mar. 2017 (1)
Highlights 1Q FYE Mar. 2017 (3 months) (1) ■Consolidated performance of 1Q FYE Mar. 2017 Maintained profitability despite decreased trading volume in the market ◆Total operating revenue after deducting financial expenses and quarterly profit attributable to owners of the Company Total operating reve
Slide 7: Highlights 1Q FYE Mar. 2017 (2)
Highlights 1Q FYE Mar. 2017 (3 months) (2) ■Consolidated performance of 1Q FYE Mar. 2017 ◆Total operating revenue after deducting financial expenses and cost of sales, quarterly profit attributable to owners of the Company Total operating revenue after deducting financial expenses and cost of sales
Slide 8: Highlights 1Q FYE Mar. 2017 (3)
Highlights 1Q FYE Mar. 2017 (3 months) (3) ・Revenues and profit went down from the previous quarter Japan ・Brokerage commissions decreased by 7% due to lower stock trading volume segment ・Booked JPY 508 M of other income as reversal of allowance for loss on cancellation of outsourcing contract due t
Slide 9: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 8
Slide 10: YoY Comparison (3 months) Consolidated Performance
YoY Comparison (3 months) Consolidated Performance (JPY million) 1Q FYE Mar. 2016 1Q FYE Mar. 2017 Change (Apr. 2015 - (Apr. 2016 - Variance Note (%) Jun. 2015) Jun. 2016) Total operating revenue after Analysis of Japan segment: P11 12,960 10,635 -2,325 -17.9％ deducting financial expenses Analysis o
Slide 11: YoY Comparison (3 months) Segment Performance
YoY Comparison (3 months) Segment Performance (JPY million) Japan US China 2016/3 2017/3 Change 2016/3 2017/3 Change 2016/3 2017/3 Change 1Q 1Q (%) 1Q 1Q (%) 1Q 1Q (%) Total operating revenue after deducting financial expenses 8,592 6,790 -21.0％ 4,336 3,976 -8.3％ 264 167 -36.8％ and cost of sales SG&
Slide 12: Analysis: Japan Segment Operating Revenue
YoY Comparison (3 months) Analysis: Japan Segment Operating Revenue Japan：Revenues decreased due to lower stock trading volume ◆ Total operating revenue after deducting financial expenses and cost of sales (compared to Apr. 2015 – Jun. 2015) （JPY million） Within () changes from FYE Mar.2016 （JPY mil
Slide 13: Analysis: Japan Segment SG&A
YoY Comparison (3 months) Analysis: Japan Segment SG&A Japan : System related expenses increased due to parallel operation of new / old backbone brokerage systems ◆ SG&A (compared to Apr. 2015 – Jun. 2015) （JPY million） Within () changes from FYE Mar.2016 Total +5.1％（+293） （JPY million） 5,774 6,068
Slide 14: Analysis: US Segment Operating Revenue (USD)
YoY Comparison (3 months) Analysis : US Segment Operating Revenue (USD) US：Revenues increased due to higher trading volume of futures offset by the decrease in revenue caused by the assignment of FX business ◆ Total operating revenue after deducting financial expenses and cost of sales (compared to
Slide 15: Analysis: US Segment SG&A (USD)
YoY Comparison (3 months) Analysis : US Segment SG&A (USD) US：Commissions paid decreased due to the assignment of FX business ◆ SG&A (compared to Apr. 2015 – Jun. 2015) （USD thousand） Within () changes from FYE Mar.2016 （USD thousand） Total 45,000 -0.9％（-368） 39,097 38,728 40,000 5,829 Others（+822）
Slide 16: QoQ Comparison (3 months) Consolidated Performance
QoQ Comparison (3 months) Consolidated Performance （JPY million） 4Q FYE Mar. 2016 1Q FYE Mar. 2017 Change Variance Note (Jan. - Mar. 2016) (Apr. - Jun. 2016) (%) Total operating revenue after Analysis of Japan segment: P17 11,393 10,635 -759 -6.7％ deducting financial expenses Analysis of US segment
Slide 17: QoQ Comparison (3 months) Consolidated Performance
QoQ Comparison (3 months) Consolidated Performance (JPY million) Japan US China 2016/3 2017/3 Change 2016/3 2017/3 Change 2016/3 2017/3 Change 4Q 1Q (%) 4Q 1Q (%) 4Q 1Q (%) Total operating revenue after deducting financial expenses and 7,103 6,790 -4.4％ 4,569 3,976 -13.0％ 175 167 -4.7％ cost of sales
Slide 18: QoQ Analysis: Japan Segment Operating Revenue
QoQ Comparison (3 months) Analysis: Japan Segment Operating Revenue Japan：Revenues decreased due to lower stock trading volumes ◆ Quarterly total operating revenue after deducting financial expenses and cost of sales (JPY million) （JPY million） Within () changes from prev. quarter 9,000 8,592 8,633
Slide 19: QoQ Analysis: Japan Segment SG&A
QoQ Comparison (3 months) Analysis: Japan Segment SG&A Japan : System related expenses increased with “TradeStation” trading platform in Japan going into operation ◆ Quarterly SG&A（JPY million） Within () changes from prev. quarter Total +3.3％（+194） （JPY million） Others（+69） 5,874 6,068 6,000 5,774 5
Slide 20: QoQ Analysis: US Segment Operating Revenue (USD)
QoQ Comparison (3 months) Analysis : US Segment Operating Revenue (USD) US : Revenues decreased due to the assignment of FX business and lower trading volume of stocks, futures and options ◆ Quarterly total operating revenue after deducting financial expenses and cost of sales （USD thousand） （USD th
Slide 21: QoQ Analysis: US Segment SG&A (USD)
QoQ Comparison (3 months) Analysis : US Segment SG&A (USD) US：Commissions paid, exchange and association dues decreased due to lower trading volume of stocks, futures and options ◆ Quarterly SG&A （USD thousand） Within () changes from prev. quarter （USD thousand） Total 45,000 -5.0％（-2,046） 39,097 40,
Slide 22: Summary of Statement of Financial Position
Summary of Statement of Financial Position The difference between “Net capital” and “Non-current assets” is the source of funds for investments and shareholders’ return ◆ Summary of consolidated statement of financial position as of June 30, 2016 Assets Liabilities (*1) Non-current assets JPY 865.4B
Slide 23: Shareholders' Return
Shareholders’ Return Aim to achieve a total return ratio (*1) of 75% on a multi-year basis and an ROE 15% over the mid- and long-term ◆Dividend per share and total return ratio ◆Return on Equity ratio Interim dividends per share(left) Year-end dividends per share(left) （yen） Total return ratio(right
Slide 24: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 23
Slide 25: Japan Segment (1) TradeStation trading platform in Japan
Business Update Japan Segment (1) “TradeStation” trading platform in Japan Developing an active trader market which has room for growth even in the sluggish market ■Launched “TradeStation” trading platform in Japan in March 2016. Full-scale marketing to be scheduled from 2Q FYE 2017 - Acquiring new
Slide 26: Japan Segment (2) Launching our active trader business
Business Update Japan Segment (2) Launching our active trader business Aim to expand the customers’ assets as well as expand the commission share ◆Customers’ assets and trading turnover* of major online ◆Estimate of active trader market in Japan brokers** (FYE Mar. 2016 / at Mar. 31, 2016) Daily tra
Slide 27: Japan Segment (3) Monex, Inc.'s customer segment
Business Update Japan Segment (3) Monex, Inc.’s customer segment Higher active accounts ratio and higher customer assets per account compared with peers Lower margin trading ratio out of stock trading value and lower brokerage commission revenue compared with peers Expand revenue by acquiring trad
Slide 28: Business Update US Segment (1)
Business Update US Segment (1) Implement additional improvement plans to cope with tougher market environment ■Implementation of further cost reduction ・In addition to 40 headcounts reduction in April 2016, implemented more than 60 headcounts reduction and restructuring on July 27, 2016 ・April reduc
Slide 29: Business Update US Segment (2)
Business Update US Segment (2) ■ Net financial income improved by interest swap and reallocation of customers’ deposit ◆Customers’ assets in custody ◆Net interest income (*2) and US Federal Fund rate (USD million) Increase in customers’ assets in custody (USD million) （％） 4,000 (*1) 35 5 Customer As
Slide 30: Business Update China Segment
Business Update China Segment Continuing the strategy to create a business opportunity while keeping a good balance with the risks in China ■ Quarterly Financial Results of Monex Boom Securities (H.K.) - Stock trading value in1Q (3 months) decreased by 15%(in H.K.). Brokerage commission revenue decr
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. Topics 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 L
Slide 33: Timeline of Mid- & Long-Term Strategy Global Vision
Timeline of Mid- & Long-Term Strategy “Global Vision” Completed project Ongoing project FYE Mar. 2013 FYE Mar. 2014 FYE Mar. 2015 FYE Mar. 2016 FYE Mar. 2017 FYE Mar. 2018 ●Nov. 2012 Upgraded U.S. equity service for Japanese customers Revenue Growth ●Dec. 2013 Started “Tokutei” accounts(*1) for Japa
Slide 34: System investments under Global Vision
System investments under Global Vision System-related assets peak out at FYE Mar. 2017 getting lower from FYE Mar. 2018. (JPY million) System related Assets* of Monex, Inc. 25,000 20,000 15,000 10,000 5,000 0 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3 Investment phase under Globa
Slide 35: V. Topics
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 34
Slide 36: Corporate Governance
Corporate Governance Establish global-standard corporate governance practices and emphasis on dialogue with retail/institutional investors Adoption of “company with three committees” structure - Highly effective executive management monitoring system - Adopted “company with committees” structure in
Slide 37: Broadening the retail investor base
Broadening the retail investor base Will begin offering wrap asset management services in fall 2016. Expecting to increase assets under management in the med- and long-term Total Cost less Financial Institutions, etc. Minimum Investment than 1％ （Banks, Stock brokers, Discretionary investment Other f
Slide 38: Investments
Continuing to create value from the viewpoint of Finance × IT × Retail Service A pioneer of the FinTech community in Japan since the company’s establishment * PFM=Personal Financial Management **DWM=Digital Wealth Management Service Offerings (brokerage etc. Robo-advisor PFM* Investment information
Slide 39: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics 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: 1.65M accounts, US: 61K 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 by region and employees
Group Overview－Revenues: 60% from Japan, 40% from US; Employees: 40% in Japan, 60% in US or China ◆Total operating revenue after deducting financial expenses ◆SG&A by segment and by cost items by region and by business Others 6% Others 2% Financial income 7% Commissions 1. Equities paid 10% 2. Syste
Slide 43: 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 44: Monex Group
Monex Group (As of July 28, 2016) Listed Holding Company [Japan] [US/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. Comprehensive investment service provider
Slide 45: 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 46: 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 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, 2016) performance, while r
Monex Group — Q1 FYE March 2017 Earnings Presentation on 6ix