Softbank Group Corp. · TSE:9984
Softbank — Q1 FY2023 Earnings Presentation
43 slides from Softbank's earnings presentation, Aug 8, 2023
Slide 1: Earnings Results for the Three-month Period Ended June 30, 2023
Earnings Results for the Three-month Period Ended June 30, 2023 Investor Briefing August 8, 2023 SoftBank Group Corp.
Slide 2: Disclaimers
Disclaimers This presentation provides relevant information about SoftBank Group Corp. (“SBG”) and its subsidiaries (together with SBG, the “Company”) and its affiliates (together with the Company, the “Group”) and does not constitute or form any solicitation of investment including any offer to buy
Slide 3: Exchange rates and abbreviations
Exchange rates per JPY used for translation FY2022 FY2023 Average during quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 USD 129.04 138.68 141.16 133.26 138.11 EOQ Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 1 USD 133.53 144.99 Abbreviations Abbreviations used in Finance section of this presentation a
Slide 4: Finance
Finance SBG stand-alone financial figures are calculated by excluding those of self- financing entities from the consolidated figures, unless otherwise stated. Major self-financing entities includes SBKK (including its subsidiaries such as Z Holdings and PayPay), SVF1, SVF2, LatAm Funds, and Arm, et
Slide 5: How We See the Current Environment
How We See the Current Environment There is a sense of easing in the ascent in US interest rates. Weaker JPY against USD YTD. In US stocks, large-cap tech companies lead the rise in key indices U.S. Interest Rates USD/JPY U.S. Stock Prices*1 Aug 7, 2023 S&P500 (%) FF Target Rate (JPY) FF金利上限 FF Targ
Slide 6: Key Drivers of Higher U.S. Stock Prices
Key Drivers of Higher U.S. Stock Prices (from Jan 1, 2023 to Aug 7, 2023) Large-cap tech and semiconductor stocks contribute to sharp recovery in U.S. stock prices. VC index also performed strongly YTD Magnificent 7 (“Large-cap Tech Names”) *1,2 Index Performances*3 S&P500 S&P500 (excl. Magnificent
Slide 7: Historical NAV and LTV
Historical NAV and LTV NAV increased for two consecutive quarters due to FX impact and higher stock prices. LTV reached an all-time low NAV LTV （¥ T） Increased Improved 18.5 18.5 by ¥1.4T LTV 25% by 3.0pp QoQ QoQ 16.7 15.5 20.4% 13.9 14.1 18.2% 11.0% 15.0% 14.5% 8.0% Mar Jun Sep Dec Mar Jun Mar Jun
Slide 8: Key Financial Activities in FY2023 Q1
Key Financial Activities in FY2023 Q1 Resuming offensive investments while adhering to financial policy NAV of ¥15.5T: +¥1.4T QoQ LTV of 8.0％: -3.0pp QoQ NAV・LTV Net debt of ¥1.4T: -¥0.3T QoQ Cash position of ¥5.8T*1: +¥0.7T QoQ Refinanced USD hybrid bonds. Fully monetized Alibaba shares - Replaceme
Slide 9: Invested Amounts (SVF1+2+LatAm+SBG/Others)
Invested Amounts（SVF1+2+LatAm+SBG/Others） Resuming investments from SVF2 and SBG/Others ($ B) 15.9 SBG/Others 1.2 13.4 8.7 SVF1+ SVF2+ 14.7 LatAm 13.1 5.9 8.6 5.6 2.5 1.8 2.3 0.5 0.5 0.5 0.9 0.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY2021 FY2022 FY2023 （Note）SBG/Others: SBG and its major wholly owned subsidia
Slide 10: Historical Alibaba Monetization
Historical Alibaba Monetization Fully monetized Alibaba shares totaling for $80.6B ($4.4B in FY2023 Q1) Aggregated Monetization Amount of Alibaba Shares 80.6 ($ B) 76.2 4.4 40.6 27.5 11.7 ~FY2019 ~FY2019 FY2020 FY2021 FY2022 FY2023 Q1 （Note） The amount of monetization is net of costs including optio
Slide 11: Beneficial Ownership of Alibaba Shares
Beneficial Ownership of Alibaba Shares Fully monetized Alibaba shares through prepaid forward contracts Beneficial 23.7% ownership Used for prepaid forward 14.6% 13.7% 13.8% 13.5% contracts *1 *2 *3 *4 *5 Jun 2022 Sep 2022 Dec 2022 Mar 2023 Jun 2023 *1 Calculated based on 21,357,323,112 ordinary sha
Slide 12: Equity Value of Holdings
Equity Value of Holdings Arm becomes a core asset. Portfolio liquidity expected to improve significantly post Arm IPO. 0.1% 5% excl. asset-backed finance 14% SBKK 23% Alibaba 15% 8% T-Mobile 10% Deutsche Telekom 10% 22% 5% 18% Arm 12% 47% SVF1・２ 43% 45% LatAm Funds 435 entities 439 entities 438 enti
Slide 13: Portfolio Diversification
Portfolio Diversification The proportion of China decreased significantly; leading to greater geographical diversification of assets % by regions of assets held excl. asset-backed finance 15% 10% China 31% 17% Japan 18% 13% APAC 11% 12% (excluding Japan and China) 9% 27% 32% EMEA 20% 4% 5% 5% Latin
Slide 14: Cash Position
Cash Position Maintain ample cash position, well over 2-year worth of bond redemptions Cash position Bond redemption schedule ¥5.8T *1 (¥ B) 702.6 Undrawn commitment line*2 ＞ 5,141.6 Bond redemptions for the next 2 years (¥2.0T) 1,155.3 824.8 861.7 664.3 Jun 2023 Jul 2023 Jul 2024 Jul 2025 Jul 2026
Slide 15: Status of Cash Deposit
Status of Cash Deposit Surplus funds continue to be deposited across several high-credit banks and mainly managed in USD Average interest rates*3 for Breakdown of cash position*1 SBG USD deposits, etc. 5.1 (¥ T) 6.0% 5.2% Subsidiaries*2 Return 0.6 4.9% 5.0% 4.5% US 2-year JPY 0.9 4.9% treasury yield
Slide 16: Breakdown by Currency
Breakdown by Currency Investments and monetization, debt financing and repayments are in principle made in the same currency. Investments and monetization Debt composition Cash position : ¥5.1T*1 Equity value of holdings : ¥16.9T*3 Debt*4 : ¥6.6T Subsidiaries*2 EUR EUR USD JPY Excl. asset- backed fi
Slide 17: Impact of Forex (FY2023 Q1)
Impact of Forex（FY2023 Q1） Weaker JPY increased NAV and equity FX losses are recorded mainly related to foreign currency-denominated borrowings from group companies On NAV On accounting Equity ＋¥1.3T + ¥1.3T Consolidated net income -¥0.5T Finance 14
Slide 18: Debt Fixed/Floating Ratio
Debt Fixed/Floating Ratio No risk of surge in interest payments amid short-term interest rate rise Fixed/Floating Ratio of SBG Stand-Alone Interest-Bearing Debt*1 14% 10% Floating rate; USD Floating rate; JPY*2 $0.1B interest payment ¥8.8B interest payment increase with a 1% rise in increase with a
Slide 19: Bond Redemption Schedule
Bond Redemption Schedule Bond issuances will be managed with due consideration for cash position and market environment 1,553.4 Domestic senior bonds （¥ B） 302.3 Domestic subordinated bonds Domestic hybrid bonds Foreign currency-denominated senior notes 1,099.3 222.0 Refinance Foreign currency-denom
Slide 20: Funding and Fund Management Plans in FY2023
Funding and Fund Management Plans in FY2023 Funding: Procurement mainly for refinancing Surplus fund management: Propelling diversification The focus is on refinancing. No plans for active fundraising at this moment Bonds Domestic: Approx. ¥400.0B of domestic senior retail bonds to be redeemed in Ma
Slide 21: LTV Management Policy
LTV Management Policy Continue LTV management with a comfortable buffer, even after resuming investments 25％ 25% To an appropriate 15.2％ level of leverage LTV average of the past four years 8.0%（All-time low） 0% Jun Sep Dec Mar Jun Sep Dec Mar Jun 2021 2021 2021 2022 2022 2022 2022 2023 2023 Finance
Slide 22: SBG Stand-alone Interest-bearing Debt
SBG Stand-alone Interest-bearing Debt*1 Slight increase in SBG stand-alone interest-bearing debt due to procurement of hybrid instruments for refinancing Main changes from Mar 2023 • Issuance of hybrid bonds and borrowing of hybrid loans +¥275.1B*2 • Entry into prepaid forward contracts +$4.4B (Alib
Slide 23: SBG Stand-alone Cash Position
SBG Stand-alone Cash Position Ample cash position exceeding ¥5T (¥ B) 5,171.3 29.6 Investments from SB Northstar, etc. Cash position of 4,528.4 SB Northstar 41.9 3,944.8 127.1 3,637.4 76.6 3,173.4 35.6 Main changes from March 2023 5,141.6* Increase Decrease 4,486.5 ・New Alibaba prepaid forward contr
Slide 24: SBG Stand-alone Net Interest-bearing Debt
SBG Stand-alone Net Interest-bearing Debt Adjusted net debt significantly decreased to a low of ¥1.4T (¥ B) 12,021.0 8,941.6 8,504.9 8,112.2 8,205.2 8,871.8 5,549.1 5,030.2 Finance-related adjustments 6,458.2 7,588.6 Asset-backed finance, etc. ¥7,442.8B Hybrid finance ¥145.9B*1 3,149.2 2,955.7 3,082
Slide 25: Historical SBG Credit Rating
Historical SBG Credit Rating Acquisition of Acquisition Acquisition Acquisition Listing A+ 14 Japan Telekom of Vodafone KK of Sprint Of Arm of SBKK A 13 JCR (A－) A- 12 Outlook Stable (since Jan 2023) BBB+ 11 BBB10 S&P Downgrade BBB-9 (May 2023) S&P (BB) BB+ 8 Outlook Stable BB 7 (since May 2023) BB-
Slide 26: Communication with Rating Agencies (JCR and S&P)
Communication with Rating Agencies (JCR and S&P) Our management team continues close dialogue with rating agencies Rating agencies’ concerns Our current status • Expected to recover significantly when Arm’s proposed initial Proportion of listed assets not public offering is completed*1 recovering •
Slide 27: SBG Credit Spread
SBG Credit Spread Tightening trend even after S&P’s credit downgrade Spread of SBG foreign currency- SBG 5-year CDS denominated senior notes 700 500 bps bps 450 600 S&P Downgrade 400 S&P 500 350 Downgrade 300 400 250 300 200 200 150 USD 1.4Y USD 2.9Y SBG 5Y CDS (JPY) 100 USD 4.9Y USD 7.9Y 100 EUR 0.
Slide 28: FY2023 Financial Strategy
FY2023 Financial Strategy Financial management Adhering to adaptable to financial policy both Defense and Offense Finance 25
Slide 29: Adherence to Financial Policy
Adherence to Financial Policy Maintain LTV below 25% in normal times 1 (upper threshold of 35% even in times of emergency) 2 Maintain at least 2-year worth of bond redemptions in cash Secure recurring distributions and dividend income from 3 SVF and other subsidiaries Finance 26
Slide 30: Respond to Both Defense and Offense
Respond to Both Defense and Offense Invest in the Defense against Information further downside Revolution, while maintaining financial stability Maintain LTV below 25% in normal times (LTV = 8.0% as of Jun 30, 2023) at least Maintain at Maintain least 2-year 2-year worth worth of of bond bond redemp
Slide 31: Capital Allocation
Capital Allocation New Shareholders investments return* Endeavor to strike a Financial policy balance (Financial stability) *The level of NAV discount is also considered Finance 28
Slide 32: SBG Income Taxes Paid on a Consolidated Basis (Net)
SBG Income Taxes Paid on a Consolidated Basis (Net) (¥ B) Total of 5 FY2018 FY2019 FY2020 FY2021 FY2022 fiscal years Consolidated 415.4 636.3 445.5 589.3 525.9 2,612.4 Japan 284.3 575.2 310.5 551.2 469.7 2,190.9 SBG and intermediate holding companies (wholly 36.8 324.7 35.7 200.0 214.2 811.4 owned s
Slide 33: (Ref.) Top Consolidated Corporate Income Tax Payments
(Ref.) Top 10 Consolidated Corporate Income Tax Payments (FY2018- 2022) (¥ B) Total of 5 Company FY2018 FY2019 FY2020 FY2021 FY2022 fiscal years 1 TOYOTA MOTOR 836.6 777.5 810.1 809.8 1,297.2 4,531.2 2 NTT 613.4 488.3 524.3 434.3 738.4 2,798.7 3 SoftBank Group 415.4 636.3 445.5 589.3 525.9 2,612.4 4
Slide 34: Appendix
Appendix
Slide 35: Calculation of Equity Value of Holdings as of Jun 30, 2023
Calculation of Equity Value of Holdings as of Jun 30, 2023 $1 = ¥144.99 (¥ T) Equity value of holdings Equity value of holdings Adjustment for ¥23.8T (adjusted) ＝ （unadjusted） ー asset-backed finance （unadjusted） Prepaid Forward ¥0.02T＝ ¥4.3T 355M shares held*1 × Share price ＄83.35*1 ー Prepaid forwar
Slide 36: LTV Calculation: SBG Stand-alone Equity Value of Holdings
LTV Calculation: SBG Stand-alone Equity Value of Holdings (L) Adjusted ¥1.35T SBG stand-alone net debt =8.0% (V) Adjusted SBG stand-alone equity value of holdings*1 ¥16.90T (¥ T) Adjusted SBG Major SBG’s interest in Other Investments = + + stand-alone equity value of holdings assets SVF1&2 & LatAm F
Slide 37: LTV Calculation: Details of Equity Value of Holdings (1/2)
LTV Calculation: Details of SBG Stand-alone Equity Value of Holdings (1/2) (¥ T) Assets Value Calculation method (a) Alibaba 0.02 Multiplying the number of Alibaba ADSs equivalent to the number of shares held by SBG by Before adjustment 4.29 the ADS price Sum of the outstanding maturity settlement a
Slide 38: LTV Calculation: Details of Equity Value of Holdings (2/2)
LTV Calculation: Details of SBG Stand-alone Equity Value of Holdings (2/2) (¥ T) Assets Value Calculation method (g) T-Mobile 1.20 summing - Value of SBG’s shareholding (incl. the number of shares subject to call options held by Deutsche Telekom Before adjustment 1.62 (DT): 34,971,809 shares as of J
Slide 39: LTV Calculation: SBG Stand-alone Net Debt
LTV Calculation: SBG Stand-alone Net Debt (L) Adjusted SBG stand-alone net debt*1 ¥1.35T (V) Adjusted SBG stand-alone ¥16.90T =8.0% equity value of holdings (¥ T) Adjusted SBG Consolidated Net debt at self- Other stand-alone net debt = net debt - financing entities - adjustments 1.35 14.70 5.76 7.59
Slide 40: LTV Calculation: Details of SBG Stand-alone Net Debt
LTV Calculation: Details of SBG Stand-alone Net Debt (¥ T) SBG stand-alone net debt Consolidated net interest-bearing debt, (before adjustment) 8.94 net of interest-bearing debt at self-financing entities*1 For hybrid bonds and hybrid loans with maturity dates, deduct 50% from interest-bearing debt;
Slide 41: Adjustment for Asset-backed Finance in LTV and NAV Calculation
Adjustment for Asset-backed Finance in LTV and NAV Calculation Non-recourse asset-backed finance is deducted from debt. Value of assets required for settlement is deducted from assets (¥ T) Collar/Forward/Put 1 2 Margin loan, etc. transactions 23.8 Main shares Alibaba SBKK, Arm used Asset-backed Fun
Slide 42: (Ref.) Forward Transaction / Collar Transaction
(Ref.) Forward Transaction / Collar Transaction Objective Non-recourse financing using derivatives • Transaction where parties agree to settle at a pre-specified price or price range at a specific date in the future • Finance through pledged shares and derivatives referencing them Outline • Settleme
Slide 43: Consolidated Interest-bearing Debt/ Cash Position/ Net Interest-bearing Debt
Consolidated Interest-bearing Debt/ Cash Position/ Net Interest-bearing Debt Consolidated Interest-bearing Debt *1 (\ B) Jun 2022 Sep 2022 Dec 2022 Mar 2023 Jun 2023 SBG stand-alone 15,842.9 12,065.7 11,250.0 12,691.7 14,083.3 Incl. SB Northstar 4.2 - - - - SVF1&2 and LatAm Funds 1,413.4 1,481.1 1,3