Monex Group, Inc. · TSE:8698
Monex — Q3 FY2017 Earnings Presentation
45 slides from Monex's earnings presentation, Jan 31, 2017
Slide 1: Financial Results for 3Q of Fiscal Year Ending March 31, 2017
January 31, 2017 (TSE 1st Section: 8698) Financial Results for 3Q 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 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 Appendix. Group Overview p.34 - p.44 2
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 3
Slide 5: Migration to a new backbone system, enabling cost reductions
Management’s recognition of the current business situation Migration to a new backbone system, enabling cost reductions and greater product development flexibility [Japan] - Migration to a new backbone system in January 2017 Switch to the offensive with - Improved product development flexibility wit
Slide 6: Both Japan and US segments back to profitability
Highlights 3Q FYE Mar. 2017 (3 months) Both Japan and US segments back to profitability - JPY 480 million net profit in 3Q (3months) due to active trading by customer. Trading volume of Japan segment stock and FX increased compared to the previous quarter. - JPY 112 million net profit in 3Q (3month)
Slide 7: Consolidated performance of 3Q FYE Mar. 2017
Highlights 3Q FYE Mar. 2017 (3 months) ■Consolidated performance of 3Q FYE Mar. 2017 Quarterly net profit due to operating environment upbeat ◆Total operating revenue after deducting financial expenses and quarterly profit attributable to owners of the Company Total operating revenue after deducting
Slide 8: Consolidated performance of 3Q FYE Mar. 2017 (US, Asia-Pacific)
Highlights 3Q FYE Mar. 2017 (3 months) ■Consolidated performance of 3Q FYE Mar. 2017 ◆Total operating revenue after deducting financial expenses and cost of sales, quarterly profit attributable to owners of the Company US Total operating revenue after deducting financial expenses and cost of sales (
Slide 9: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 8
Slide 10: YoY Comparison (9 months) Consolidated Performance
YoY Comparison (9 months) Consolidated Performance (JPY million) 3Q FYE Mar. 2016 3Q FYE Mar. 2017 Change (Apr. 2015 - (Apr. 2016 - Variance Reference (%) Dec. 2015) Dec. 2016) Total operating revenue after P11: Analysis of Japan segment 38,249 30,519 -7,730 -20.2% deducting financial expenses P13:
Slide 11: YoY Comparison (9 months) Segment Performance
YoY Comparison (9 months) Segment Performance (JPY million) Japan US Asia Pacific 2016/3 2017/3 Change 2016/3 2017/3 Change 2016/3 2017/3 Change 3Q 3Q (%) 3Q 3Q (%) 3Q 3Q (%) Total operating revenue after deducting financial expenses 24,720 19,401 -21.5% 13,972 11,502 -17.7% 655 509 -22.3% and cost
Slide 12: YoY Comparison (9 months) Analysis: Operating Revenue
YoY Comparison (9 months) Analysis: Operating Revenue Japan：Revenues decreased due to lower market trading volumes of stocks ■ Total operating revenue after deducting financial expenses and cost of sales (compared to Apr. 2015 - Dec. 2015) （JPY million） 25,000 24,720 2,660 Total operating revenue af
Slide 13: YoY Comparison (9 months) Analysis: SG&A
YoY Comparison (9 months) Analysis: SG&A Japan : Increased system related cost due to starting amotization of Japanese equities trading platform and phased launch of new backbone system ■ SG&A (compared to Apr. 2015 - Dec. 2015) （JPY million） 20,000 SG&A Total +5.7% ( + 997) 18,444 *Within () change
Slide 14: YoY Comparison (9 months) Analysis: Operating Revenue (USD)
YoY Comparison (9 months) Analysis : Operating Revenue (USD) US：Revenue excluding the sale of FX business is almost same as the previous year. Enhancement of net financial income covers the decline in brokerage commission ■ Total operating revenue after deducting financial expenses and cost of sales
Slide 15: YoY Comparison (9 months) Analysis: SG&A (USD)
YoY Comparison (9 months) Analysis : SG&A (USD) US：Decrease in commissions paid and other expenses due to lower market trading volume. Also decrease in compensation and benefits excluding one-time expense such as severance payment ■SG&A (compared to Apr. 2015 - Dec. 2015) （USD thousand） 120,000 112,
Slide 16: QoQ Comparison (3 months) Consolidated Performance
QoQ Comparison (3 months) Consolidated Performance （JPY million） 2Q FYE Mar. 2017 3Q FYE Mar. 2017 Change Variance Reference (Jul.-Sep. 2016) (Oct.-Dec. 2016) (%) Total operating revenue P17: Analysis of Japan segment after deducting financial 9,466 10,419 953 10.1% P19: Analysis of US segment (USD)
Slide 17: QoQ Comparison (3 months) Segment Performance
QoQ Comparison (3 months) Segment Performance (JPY million) Japan US Asia Pacific 2017/3 2017/3 Change 2017/3 2017/3 Change 2017/3 2017/3 Change 2Q 3Q (%) 2Q 3Q (%) 2Q 3Q (%) Total operating revenue after deducting financial expenses and 5,953 6,658 11.8% 3,677 3,849 4.7% 171 170 -0.6% cost of sales
Slide 18: QoQ Comparison (3 months) Analysis: Operating Revenue
QoQ Comparison (3 months) Analysis: Operating Revenue Japan：Increased market trading volume triggered by US presidential election ■Quarterly total operating revenue after deducting financial expenses and cost of sales （JPY million） 8,000 7,495 Quarterly total operating revenue after 7,103 deducting
Slide 19: QoQ Comparison (3 months) Analysis: SG&A
QoQ Comparison (3 months) Analysis: SG&A Japan : Increased depreciation cost due to phased launch of new backbone brokerage systems ■Quarterly SG&A （JPY million） SG&A Total +3.2％ ( +192) 7,000 *Within () changes from previous quarter 6,284 5,824 5,874 6,068 6,092 ■Others ( +20) ■Advertising expenses
Slide 20: QoQ Comparison (3 months) Analysis: Operating Revenue (USD)
QoQ Comparison (3 months) Analysis : Operating Revenue (USD) US : Revenue excluding system development for Japan is almost same as the previous quarter ■Quarterly total operating revenue after deducting financial expenses and cost of sales （USD thousand） 39,377 Total operating revenue after deductin
Slide 21: QoQ Comparison (3 months) Analysis: SG&A (USD)
QoQ Comparison (3 months) Analysis : SG&A (USD) US : Headcount reduction in 1H of this fiscal year contributed to reduction of SG&A from 3Q ■Quarterly SG&A （USD thousand） 45,000 40,774 38,728 SG&A Total -9.0% ( -3,355) 40,000 36,375 37,273 *Within () changes from previous quarter(USD thousand) 5,898
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 December 31, 2016 Assets Liabilities (*1) Non-current assets JPY 99
Slide 23: Shareholders' Return
Shareholders’ Return Aim to achieve a total return ratio (*1) of 75% on a multi-year basis by dividend and share buyback ◆Dividend per share and total return ratio ◆Return on Equity ratio Interim dividends per share(left) （yen） Year-end dividends per share(left) Total return ratio(right) 30 300% 40%
Slide 24: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 23
Slide 25: Business Update Japan Segment (1) Migration to new backbone system
Business Update Japan Segment (1) Migration to new backbone system Completed migration to the new backbone system. Focus on improvement and enhancement of customer usability going forward ■Completed migration to new backbone system in January 2017 - Obtained flexibility for development and implement
Slide 26: Business Update Japan Segment (2) Two initiatives
Business Update Japan Segment (2) Two initiatives Wrap asset management service provided by Monex- Japanese stock trading platform developed by Saison-Vanguard Investment Partners TradeStation group - 85% of customers use monthly investment service - Flexible commission plans to meet customer’s trad
Slide 27: Business Update 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 and lower brokerage commission revenue compared with peers Increase revenue by acquiring trader-type customers while m
Slide 28: Business Update US Segment (1)
Business Update US Segment (1) Achieved quarterly profit despite low volatility in the market ■Fixed cost reduction - Headcount reduction in April and July 2016 contributed from 3Q. USD 1.1 million improvement per month on cash flow basis(FY 3Q compared to FYE March 2016) ■Efforts on expanding custo
Slide 29: Business Update US Segment (2)
Business Update US Segment (2) ■ Net financial income improved ◆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 Customer Assets(Institutional) 35 5 Net interest income from investment(left
Slide 30: Business Update Asia Pacific Segment
Business Update Asia Pacific Segment Continuing strategy to create a business opportunity in Asia Pacific ■ Change in the segment name from “China” to “Asia Pacific” - Transition of Monex Securities Australia Pty Ltd from US segment to Asia Pacific segment in November 2016 - Supported to launch onli
Slide 31: IV. Mid- & Long-Term Strategy Global Vision
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 30
Slide 32: Mid- & Long-Term Strategy Global Vision
Mid- & Long-Term Strategy “Global Vision” Completed migration to the new backbone system ■ Mid- and long-term revenue growth Measures Progress and Achievements Launching a trading platform for Japanese active traders Launched in Mar. 2016 developed by TradeStation. Full-scale marketing to be schedul
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 Japan
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 Global
Slide 35: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 34
Slide 36: 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 37: Group Overview – Continuous growth over years
Group Overview – Continuous growth over 15 years Japan: 1.68M accounts, US: 79K 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 38: Group Overview – Revenues and employees by segment
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 5% Others 2% Financial income 8% Commissions 1. Equities paid 8% 1. Option
Slide 39: Group Overview–Corporate value creation cycle
Group Overview－Corporate value creation cycle 38
Slide 40: Investments: Finance × IT × Retail Service
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 41: 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 42: Monex Group structure as of January 31, 2017
Monex Group (As of January 31, 2017) Listed Holding Company [Japan] [US/Europe] [Asia Pacific] Online Securities Company Monex International Limited Holding Company in Hong Kong TradeStation Group, Inc. Holding Company in the U.S. Monex, Inc. Comprehensive investment service provider Online Securiti
Slide 43: 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 44: History of Monex Group
History of Monex Group Japan U.S. Asia Pacific 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 Inter
Slide 45: 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, 2016) Monex Group, Inc