Softbank Group Corp. · TSE:9984
Softbank — Q1 FY2015 Earnings Presentation
68 slides from Softbank's earnings presentation, Aug 6, 2015
Slide 1: Earnings Results for the 3-month Period Ended June 30, 2015
Earnings Results for the 3-month Period Ended June 30, 2015 August 6, 2015
Slide 2: Disclaimer
Disclaimer This material was prepared based on information available and views held at the time it was made. Statements in this material that are not historical facts, including, without limitation, plans, forecasts and strategies are “forward-looking statements”. Forward-looking statements are by t
Slide 3: Committed to Turnaround
Committed to Turnaround Sprint >
Slide 4: SoftBank Group Consolidated Results
SoftBank Group Consolidated Results 3
Slide 5: Consolidated Results
Consolidated Results (JPY bn) FY2014 FY2015 Change YoY Q1 Q1 Net sales 1,948.3 2,139.1 +190.8 +10% EBITDA 567.0 659.1 +92.1 +16% EBIT 319.4 343.6 +24.2 +8% Net income 77.6 213.4 +135.8 +175% *The profit and loss of GungHo is reclassified in discontinued operations (FY2014, Apr. 1 - June 1, 2015). Ne
Slide 6: Net Sales
Net Sales JPY 2.1t 1.9t Others Yahoo Japan Distribution YoY 10% increase Domestic Telecommunications: Sprint increase in product sales Sprint segment: FX impact Domestic Telecommunications (Exchange rate) Apr. - June 2014: JPY 102.14 / USD Apr. - June 2015: JPY 121.34 / USD FY2014 FY2015 Q1 Q1 5
Slide 7: EBITDA
EBITDA JPY 659.1bn Others 567.0bn Yahoo Japan YoY 16% increase Sprint Contribution of Sprint & Domestic Telecommunications Sprint: - FX impact - Decrease in COGS - Lower cost of service Domestic Telecommunications (Exchange rate) Apr. - June 2014: JPY 102.14 / USD Apr. - June 2015: JPY 121.34 / USD
Slide 8: EBIT (Operating income)
EBIT(Operating income) JPY 343.6bn 319.4bn Others Yahoo Japan Sprint YoY 8% increase Contribution of Domestic Telecommunications & Sprint Domestic Telecommunications (Exchange rate) Apr. - June 2014: JPY 102.14 / USD Apr. - June 2015: JPY 121.34 / USD FY2014 FY2015 Q1 Q1 7
Slide 9: Net Income
Net Income (Net income attributable to owners of the parent) JPY 213.4bn Revaluation gain on investments YoY 175% (2.8x) increase 57.6bn Revaluation gain on 155.8bn investments (57.6bn) 77.6bn Income on equity method investments related to Alibaba (43.4bn) *Revaluation gain on investments: gain from
Slide 10: Domestic Telecommunications
Domestic Telecommunications 9
Slide 11: SoftBank Corp.
Domestic Telecommunications SoftBank Mobile SoftBank BB SoftBank Telecom Ymobile Merger Strengthen growth strategy SoftBank Corp. Efficient management Toward No. 1 mobile Internet core company 10
Slide 12: Telecom Service Revenue
Telecom Service Revenue Domestic Telecom (Mobile communications) JPY 482.4bn Others PHS Communication modules, etc. Focus on main subscribers Main subscribers JPY 441.1bn (exceeds 90%) Maximize smartphone Smartphones, net additions conventional mobile phones, tablets, etc. & reduce churn rate (31.57
Slide 13: ARPU (Main subscribers)
Domestic Telecom ARPU (Main subscribers) JPY 4,700 4,660 480 Service 520 ARPU Maximize service ARPU Enhance partnership with Yahoo Japan Telecom 4,220 4,140 ARPU New growth areas FY2014 FY2015 Q1 Q2 Q3 Q4 Q1 12
Slide 14: Churn (Main subscribers)
Domestic Telecom Churn (Main subscribers) 2.0% 1.57% 1.5% 1.38% 1.30% 1.19% 1.24% SoftBank Higher than competitors 1.0% KDDI 0.79% NTT DOCOMO Strive to improve churn rate from various angles 0.5% FY2014 FY2015 Q1 Q2 Q3 Q4 Q1 *NTT DOCOMO’s churn is represented based on the conventional calculation me
Slide 15: EBIT (Operating income)
Domestic Telecom EBIT (Operating income) JPY 214.4bn Focus on profitability Acquisition of smartphone users Cost efficiency ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 (FY) Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 *After FY2014: Domestic Telecommunications business Japanese-GAAP IFRSs Up to FY2013: Mobile C
Slide 16: Broadband Service Cumulative Subscribers
Broadband Service Domestic Telecom Cumulative Subscribers 540k Not connected yet 90k July net adds 110k June Acc. 340k Reached 540k July 2015 SoftBank Hikari in July SoftBank Hikari 4.45mil Make optical fiber service 340k growth driver Yahoo! BB ADSL 1.50mil Yahoo! BB Hikari with FLET’S 2.61mil FY20
Slide 17: EBITDA / CAPEX
Domestic Telecom EBITDA / CAPEX (JPY) 1,065.9bn EBITDA 992.3bn 889.3bn 790.4bn 726.4bn 712.5bn Expect EBITDA 631.6bn growth in FY2015 535.5bn 474.1bn 392.6bn 390.0bn 390.0bn CAPEX peaked out CAPEX Generating FCF 2010 ’11 ’12 ’13 ’14 ’15 ’16 (FY) (estimate) (estimate) *Japanese-GAAP: CAPEX spent by f
Slide 18: Internet Companies
Internet Companies 17
Slide 19: EBIT (Operating income)
EBIT(Operating income) JPY 49.1bn • Transform business model • Mobile centric strategy • Collaborate with Alibaba 2004 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 (FY) Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Japanese-GAAP IFRSs 18
Slide 20: Smartphone Advertising Revenue
Smartphone Advertising Revenue JPY 24.2bn 17.6bn • YoY 38% increase • Launched timeline-view on top page • Aim at sales increase by listing new advertising products FY2013 FY2014 FY2015 Q1 Q1 Q1 *Smartphone advertising revenue includes some revenue via tablet devices. 19
Slide 21: Shopping Transaction Value (YoY growth)
Shopping Transaction Value (YoY growth) Abolish tenant fees, etc. +23% • YoY 23% increase • New e-commerce +4% strategy is successful -2% FY2013 FY2014 FY2015 Q1 Q1 Q1 *Includes transaction value of Yahoo! Shopping and LOHACO. 20
Slide 22: World's Top Grossing Games Ranking
World’s Top Grossing Games Ranking 1 Clash of Clans Supercell 2 Monster Strike Mixi/Tencent 3 Puzzle & Dragons GungHo • Maximize existing value 4 Game of War - Fire Age Machine Zone 5 Fantasy Westward Journey NetEase • Create new entertaining 6 Candy Crush Saga King/Tencent games 7 Boom Beach Superc
Slide 23: Gross Merchandise Volume
Gross Merchandise Volume JPY 60t (Global) 51t 50t 47t • Enhance ecosystem 40t (U.S.) 35t • Mobile focus 30t • Increase cross-border 20t sales 10t (Source) Created by SoftBank Group Corp. based on publicly available historical Alibaba Apr. ’11 - Mar. ’12 Apr. ’12 - Mar. ’13 Apr. ’13 - Mar. ’14 Apr. ’
Slide 24: Gross Merchandise Volume
Gross Merchandise Volume YoY • Expand GMV further 222% • Exceeds 100k sellers • May 2015 record GMV July - Sept. Apr. - June Apr. - June 2012 2014 2015 23
Slide 25: Gross Merchandise Volume
Gross Merchandise Volume (USD) $2.3bn New customers increasing Customer spend growing Mobile commerce market expanding FY2011 Q1 FY2015 Q2 (LTM rolling) (LTM rolling) 24
Slide 26: Market Share (India)
Market Share (India) Others 15% • Expand share further • 6 times registered vehicles since investment + * • Appointed Arun Sarin as 85% an independent director Nov. 2014 60% (Note) Market share as of end of June 2015 *Former Vodafone Group Plc global CEO 25
Slide 27: Quarterly Bookings
Quarterly Bookings 7.4x • Rapid growth • Aggressive expansion into new product lines Apr. - June Apr. - June 2014 2015 26
Slide 28: Rides
Rides 3x • Leading on-demand platform in China • Strategic support from Alibaba and Tencent • Much headroom for growth June 2014 June 2015 *Number of completed rides with private cars and Taxis 27
Slide 29: pepper
pepper
Slide 30: Sold out in 1 minute in June & July
Sold out in 1 minute in June & July (1,000 units each) Next offering on Aug. 29 29
Slide 31: Started in July 2015
× Entertain customers and provide useful information Started in July 2015 30
Slide 32: Monthly wage JPY 55,000
Monthly wage JPY 55,000 Applications accepted from Oct. 1, 2015 *36 months contract (total of JPY 1.98mil), Pepper to be returned at end of contract. 31
Slide 33: pepper
pepper
Slide 34: 14 Years Ago
14 Years Ago 33
Slide 35: Enter Telecom Business
Enter Telecom Business 2001 2006 34
Slide 36: Rapid growth
Mobile EBIT 695bn JPY Rapid growth 76bn 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 (FY) 35
Slide 37: Three years ago
Three years ago Opportunity for growth in U.S. 36
Slide 38: Disparity: Japan vs U.S.
Disparity: Japan vs U.S. Price per GB (mobile) LTE Speeds $52 Australia 24.5Mbps Italy 22.2Mbps SoftBank 21.3Mbps $30 Brazil 21.0Mbps Canada 19.3Mbps UK 17.3Mbps France 17.3Mbps Germany 13.6Mbps Mexico 12.9Mbps U.S. 6.5Mbps Japan U.S. High Price Low Speed (Source) BAML, Cisco, OpenSignal - Q1 2014,
Slide 39: Vision: become No.1 through merger
Vision: become No.1 through merger + No.3 No.4 38
Slide 40: Was Not Meant to Be
Was Not Meant to Be + 39
Slide 41: However, we did not give up
However, we did not give up 40
Slide 42: Combined efforts led to new strategy
Combined efforts led to new strategy: 41
Slide 43: We can replicate turnaround
We can replicate turnaround 42
Slide 44: Track Record
Track Record SoftBank
Slide 45: SoftBank Mobile Track Record
SoftBank Mobile Track Record Large OPEX reduction Maximize CAPEX efficiency 44
Slide 46: OPEX large reduction
15,000 SoftBank Mobile (JPY bn) SoftBank Mobile Service revenue 10,000 1,000 Operating income OPEX OPEX large reduction 5,000 500 2004 2005 2006 2007 2008 2009 2010 (FY) *Japanese-GAAP (before branding fees) 45
Slide 47: CAPEX efficiency and data connectivity
SoftBank Mobile CAPEX (accumulated) Data Connectivity FY2006 - FY2014 (Smartphone) JPY 6.6t 99% Higher SoftBank 98.8% NTT DOCOMO 98% 98.2% Lower 4.6t au 97.6% 3.9t 97% 96% 95% SoftBank KDDI NTT DOCOMO Domestic 2013 2015 Telecommunications* *The sum of the 5 telecommunications companies. (Excluding r
Slide 48: Apply to Sprint
‘ 47 tp rin Sp = k nN Ba ft SO
Slide 49: Keys to Sprint Improvement
Keys to Sprint Improvement Large OPEX reduction Maximize CAPEX efficiency 48
Slide 50: Improve margin
Mobile EBITDA Margin 50% SoftBank 38% 37% 27% 22% Sprint Improve margin 14% 2002 2004 2006 2008 2010 2012 2014 (FY) * Figures for 2002 - 2012 are calendar year based. * Figures shown after 2013 are shown on a fiscal year basis. 49
Slide 51: Network Quality
Network Quality SoftBank Sprint (Smartphone data connectivity ratio) (RootMetrics awards) 180 99% Higher SoftBank 98.8% NTT DOCOMO 98% 98.2% au 97.6% 97% 96% 95% 27 2014 2015 2013 2015 Jan. - June Jan. - June Feb. 10 June 28 50
Slide 52: Sales / Financing Method
Sales / Financing Method SoftBank Mobile Sprint Device sales Installments Leases Securitization of Device financing Financing account receivables using leases 51
Slide 53: Reduce Debt
Reduce Debt Debt balance at time of VF acquisition Sprint net interest-bearing debt JPY1.4t Original plan (Minimum case) USD 31.9bn Actual Reduce FY11Q3 Redeemed (Refinanced) FY2015 FY06 FY18 June Q4 Q2 52
Slide 54: Reduce Debt (Net interest-bearing debt / EBITDA multiple)
Reduce Debt (Net interest-bearing debt / EBITDA multiple) After SoftBank Sprint (Times) Vodafone (Times) acquisition 7 7 6.2x 6 6 4.9x 5 5 4 4 3 3 2 2 Improve 1 1 1.1x 2006 2007 2008 2009 2010 2011 2012 2015 June Mar. Mar. Mar. Mar. Mar. Mar. June *Japanese-GAAP *Excluding leases *Net debt excluding
Slide 55: Promising Improvements
Promising Improvements 54
Slide 56: Net Additions (Postpaid)
Net Additions (Postpaid) Marcelo’s +310k appointment • Lower churn • Improved customer quality • Phone net losses turning positive (May, June & July) 2013 2014 2015 Oct. - Dec. Jan. - Mar. Apr. - June July - Sept. Oct. - Dec. Jan. - Mar. Apr. - June *Sprint platform 55
Slide 57: Churn (Postpaid)
Churn(Postpaid) (%) Marcelo’s appointment 2.3% • Record low • Improved customer quality and network performance 1.56% 1.0% 2013 2014 2015 Oct. - Dec. Jan. - Mar. Apr. - June July - Sept. Oct. - Dec. Jan. - Mar. Apr. - June *Sprint platform 56
Slide 58: Adjusted EBITDA
USGAAP Adjusted EBITDA Joined $2.1bn SoftBank Group $1.8bn • YoY 14% increase • Decrease in COGS due to higher ratio of leased devices • Lower cost of service (wireline network, wireless bad debt expenses, etc.) ’11 ’12 ’13 ’14 ’15 *For the conventional sales of mobile devices, including the install
Slide 59: Operating Income
USGAAP Operating Income Joined SoftBank Group $0.52bn $0.5bn • Positive • Cost reduction offsets decline in operating revenue ’11 ’12 ’13 ’14 ’15 Apr. - June Apr. - June Apr. - June Apr. - June Apr. - June 58
Slide 60: Net Income
USGAAP Net Income Joined SoftBank Group $23mil -$20mil Positive operating income reduced by interest expense ’11 ’12 ’13 ’14 ’15 Apr. - June Apr. - June Apr. - June Apr. - June Apr. - June 59
Slide 61: Sprint's Foreseeable Additional Capital Funding
Sprints’ Foreseeable Additional Capital Funding 1. No increase of public bonds 2. No equity financing 60
Slide 62: Toward Real Improvement
Toward Real Improvement Aim to be Reduce OPEX No.1 network × Maximize Enhance customer CAPEX efficiency acquisitions 61
Slide 63: Conclusion
Conclusion 62
Slide 64: See light at the end of the tunnel
See light at the end of the tunnel 63
Slide 65: Committed to Turnaround
Committed to Turnaround Sprint >
Slide 66: SoftBank Group Corp. Share Repurchase
SoftBank Group Corp. Share Repurchase Total number of repurchasable shares 20,000,000* (maximum) Total cost of shares to be repurchased JPY 120 billion (maximum) 65
Slide 67: SoftBank
— SoftBank
Slide 68: Adoption of IFRSs, definition of terms, trademarks
1. Adoption of IFRSs SoftBank Group Corp. adopted the International Financial Reporting Standards (IFRSs) from fiscal 2013. Figures for fiscal 2012 have also been presented in accordance with IFRSs. 2. Definition of terms etc. in this material. Free cash flow = cash flows from operating activities +