Softbank Corp. · TSE:9434
Softbank — Q1 FY2020 Earnings Presentation
38 slides from Softbank's earnings presentation, Aug 4, 2020
Slide 1: Earnings Results for the Three Months Ended June 30, 2020
Earnings Results for the Three Months Ended June 30, 2020 Investor Briefing SoftBank Corp. August 4, 2020
Slide 2: Disclaimer
Disclaimer Important Notice Regarding Forward Looking Statements and Other Information This document is based on the information available to SoftBank Corp. (“we” or “the Company”) as of the time hereof and assumptions which it believes are reasonable. Statements contained herein that are not histor
Slide 3: Contents
Contents 1 Results for Q1 FY2020 p.4 – p.20 2 Road to Achieve JPY 1 Trillion Operating Income p.21 – p.26 3
Slide 4: Results for Q1 FY2020
SoftBank Results for Q1 FY2020
Slide 5: Results for Q1 FY2020
Results for Q1 FY2020 ◼ Revenue, operating income and net income are progressing at a steady pace towards full-year forecasts ◼ Net income decreased due to the temporary factors such as gain from sales of shares in previous year (refer to p15) Revenue Operating Income Net Income*1 [JPY bn] Progress
Slide 6: Revenue (1/2)
Revenue (1/2) ◼ Yahoo: JPY +35.2 bn (+14.8%) YoY, Enterprise: JPY +8.1 bn (+5.2%) YoY ◼ Consumer: JPY -32.6 bn (+0.6%) YoY, due to decrease of revenue JPY -31.1 bn from sales of goods and others. Service revenues remained flat YoY, due to impact of First-year and Half-year discounts of c. 10 bn (inc
Slide 7: Revenue (2/2)
Revenue (2/2) ◼ Enterprise: JPY +8.1 bn (+5.2%) YoY in Business solution and others ◼ Yahoo: double-digit growth. Commerce has grown significantly, JPY +41.2 bn (+25.0%) YoY Enterprise Breakdown Yahoo Breakdown [JPY bn] 4,000 [JPY bn] +35.2 YoY +14.8% 273.9 2,000 +8.1 0.5 -0.9 -63.2% 238.6 +5.2% YoY
Slide 8: Operating Income/Adjusted EBITDA/Segment Income
Operating Income/Adjusted EBITDA/Segment Income ◼ Adjusted EBITDA: JPY +18.9 bn (+4.4％) YoY, operating income: JPY +11.1 bn (+4.1％) YoY, recorded good progress in Q1 ◼ Yahoo made significant increase YoY, income also increased in Enterprise and Distribution. Consumer: JPY -16.4 bn (-8.0％) YoY, howev
Slide 9: Operating Income (YoY Comparison)
Operating Income (YoY Comparison) ◼ Income of Consumer decreased due to mobile device related factors and impact from introduction of First-year and Half-year discounts (accounting change, etc.). Increase of income in Yahoo and enterprise drove overall performance -16.4 +3.1 +0.2 +14.5 +9.6 [JPY bn]
Slide 10: Summary of Results
Summary of Results ◼ Negative impact of COVID-19 was limited compared to assumptions as of May when financial guidance was [億円] announced, cost reduction is in good progress, and upside effects such as telework demand was larger than expected [JPY bn] FY19Q1 FY20Q1 YoY Reasons for variance Operating
Slide 11: Cumulative Subscribers (Main Subscribers/Smartphones)
Cumulative Subscribers (Main Subscribers/Smartphones) ◼ Cumulative main subscribers reached 36.87 mil (+1.86 mil YoY) ◼ Cumulative smartphones reached 24.50 mil (+2.04 mil YoY), similar increase to last year, steady growth in all 3 brands Cumulative Subscribers*1 Smartphone Subscribers YoY 40 [Mil]
Slide 12: Churn Rate (Main Subscribers/Smartphones)
Churn Rate (Main Subscribers/Smartphones) ◼ Churn rates for main subscribers and smartphones reached record lows, smartphone churn rate dramatically improved, YoY -0.28% 0.01 0.01 1.03% 0.99% 0.01 YoY 0.73% 0.01 -0.29% Main subscribers 0.81% 0.01 0.72% 0.53% -0.28% Smartphones 0.00 0.00 0.00 Q1 Q2 Q
Slide 13: ARPU (Main Subscribers)
ARPU (Main Subscribers) ◼ ARPU before discount decreased due to introduction of unbundling plan (including family discounts and Smartphone Debut Plan), effects from First-year and Half-year discount*1, and a rise in composition ratio of Y!mobile and LINE MOBILE subscribers (a) ◼ Discount ARPU gradua
Slide 14: Broadband Service
Broadband Service ◼ SoftBank Hikari cumulative subscribers (connected lines) reached 6.60 mil, steadily increased by 0.55 mil YoY ◼ Increase in subscribers accelerated partly from increase in telework demand (Net adds of FY20Q1 +0.14, FY20Q1 +0.06) Home Bundle Discount Hikari Set steadily increased
Slide 15: Net Income (YoY Comparison)
Net Income (YoY Comparison) ◼ Effect from one-time factors of last fiscal year such as gains on sales and valuations of shares (a) ◼ Shares of profit/losses of associates accounted for using the equity method: Loss increased from upfront marketing investment to new businesses, such as PayPay (b) ◼ I
Slide 16: CAPEX/Adjusted Free Cash Flow
CAPEX/Adjusted Free Cash Flow ◼ CAPEX was JPY 76.2 bn. CAPEX excluding ZHD was JPY 58.3 bn ◼ Adjusted free cash flow excluding ZHD (including IFRS 16 impact) was JPY 236.3 bn. Steady progress towards full-year target of JPY 670.0 bn CAPEX*1 Adjusted FCF*2 [JPY bn] [JPY bn] (Total) (126.5) (179.2) 90
Slide 17: Interest-bearing Debt/Net Interest-bearing Debt and Net Leverage Ratio
Interest-bearing Debt/Net Interest-bearing Debt and Net Leverage Ratio ◼ Accumulated cash in hands to prepare for COVID-19 by full securitization of sales receivables. Interest-bearing debt increased QoQ partly due to the issuance of bonds by ZHD of JPY 200.0 bn ◼ Net leverage ratio slightly increas
Slide 18: Major Financing Activities (Excluding ZHD)
Major Financing Activities (Excluding ZHD) ◼ Secured sufficient liquidity on hand in preparation for COVID-19 ◼ Succeeded in the large-scale straight bond issuance of JPY 100.0 bn due to strong investors’ appetite FY20Q1 Time Category Events Purpose, effect, etc. balance period Securitization of tel
Slide 19: Status of Assets and Equity
Status of Assets and Equity ◼ Shareholders’ equity ratio is 9.5%, -0.7% from end of March 2020 (Ratio of total equity to total asset 16.4%) ◼ Shareholders’ equity ratio would be 12.7%, excluding the accounting treatment in connection with ZHD consolidation As of As of Decrease of Increase of [JPY bn
Slide 20: Timeline of Business Integration between ZHD and LINE
Timeline of Business Integration between ZHD and LINE Nov. 18, Dec. 23, Aug 4, Jan 2021 Mar 2021 2019 2019 2020 (Plan) (Plan) Commencement of Commencement of joint tender offer for tender offer for LINE shares by ZHD shares by Signing of Signing of SoftBank & NAVER LINE Memorandum of Definitive Clos
Slide 21: Road to Achieve JPY 1 Trillion Operating Income
Road to Achieve JPY 1 Trillion Operating Income
Slide 22: Financial Targets
Financial Targets FY19 Actual FY20 Forecast FY22 Forecast Revenue JPY 4,861.2 bn JPY 4,900.0 bn JPY 5,500.0 bn Adjusted EBITDA*1 1,603.1 bn 1,630.0 bn 1,700.0 bn Operating income 911.7 bn 920.0 bn 1,000.0 bn Net income*2 473.1 bn 485.0 bn 530.0 bn CAPEX*3 371.3 bn 400.0 bn c. 400.0 bn Adjusted FCF*4
Slide 23: Profit and Business Targets by Segments (FY20-FY22)
Profit and Business Targets by Segments (FY20-FY22) ◼ Continue to accelerate “Beyond Carrier” strategy to achieve operating income of over JPY 1 tn and pursue [億円] growth continuously thereafter Operating Income [JPY] over 1 tn Profit targets by Segment 911.7 bn 920 bn Consumer Profit increase every
Slide 24: Structural Reform – Cost Efficiency
Structural Reform – Cost Efficiency ◼ We aim to reduce fixed costs to absorb increase from new business expansion, and thus keep total fixed costs flat Cost of Sales and Selling, General and Cost Efficiency Measures Administrative Expenses Consumer and [JPY] Enterprise business Flat fixed costs Fixe
Slide 25: Financial Discipline
Financial Discipline ◼ We aim to generate stable free cash flow, and strengthen financial position by decreasing interest-bearing debt over years Adjusted FCF (excludes ZHD)*1 Net Leverage Ratio*2 Over 670 bn every year Improve from 2.4x (excluding impact from LINE TOB) (excluding impact from LINE T
Slide 26: Shareholder Returns
Shareholder Returns ◼ Continue stable and high dividend payments Shareholder Returns No dividend reduction every year / Achieve both growth and total shareholder return ratio of c. 85% (3-year weighted average*) shareholder returns 86+α [JPY] Share 85 86 buyback Dividend 75 Per share Shareholder Gro
Slide 27: Appendix
SoftBank Appendix
Slide 28: Consolidated Statements of Income
Consolidated Statements of Income [億円] [JPY bn] FY19Q1 FY20Q1 Variance Reasons for Variance Revenue 1,164.9 1,172.6 +7.8 Cost of sales -579.8 -569.6 +10.2 Gross profit 585.1 603.1 +18.0 Selling, general and administrative expenses -316.2 -323.1 -6.9 Operating Income 268.9 279.9 +11.1 Share of gain /
Slide 29: Consolidated Statements of Financial Position (Assets)
Consolidated Statements of Financial Position (Assets) [億円] [億円] [JPY bn] As of As of Variance Reasons for Variance Mar 31, 2020 Jun 30, 2020 Total assets 9,792.3 10,078.5 +286.3 Current assets 3,364.3 3,674.2 +309.9 Cash and cash equivalents 1,143.8 1,469.4 +325.6 Increase in funds procured from se
Slide 30: Consolidated Statements of Financial Position (Liabilities)
Consolidated Statements of Financial Position (Liabilities) [億円] [JPY bn] As of As of Variance Reasons for Variance Mar 31, 2020 Jun 30, 2020 Total liabilities 8,084.7 8,421.4 +336.7 Current liabilities 4,496.6 4,631.2 +134.6 Interest-bearing debt 1,811.3 2,119.8 +308.6 Increase from securitization
Slide 31: Consolidated Statements of Financial Position (Equity)
Consolidated Statements of Financial Position (Equity) [億円] [JPY bn] As of As of Variance Reasons for Variance Mar 31, 2020 Jun 30, 2020 Total equity 1,708 1,657 -50.4 Equity attributable to owners of the Company 1,001 957 -43.7 Common stock 204 204 - Capital surplus -134 -141 -7.5 -201.5 from divid
Slide 32: Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows [JPY bn] FY19Q1 FY20Q1 Reasons for Variance Cash flows from operating activities 205.2 246.4 Net income 172.6 168.1 Depreciation 164.0 170.8 Change in working capital -46.7 -26.2 Interest paid -12.9 -14.8 Income taxes paid/refunded -128.6 -270.3 Increase related
Slide 33: Subsidiaries (1/2)
Subsidiaries (1/2) ◼ 265 group companies at the end of Jun 2020 (of which, 203 subsidiaries and 62 affiliate*1 companies) Ratio of Voting Segment Company Name Business Description Blue: listed company Rights Held Wireless City Planning Inc. 32.2% Telecommunication services (Economic interests: 99.5%
Slide 34: Subsidiaries (2/2), Affiliates
Subsidiaries (2/2), Affiliates Ratio of Voting Segment Company Name Business Description Blue: listed company Rights Held HAPSMobile Inc. 92.9% R&D and manufacturing of network equipment for HAPS business SB Payment Service Corp. 100.0% Payment processing SB Cloud Corp. 60.0% Sales of public cloud s
Slide 35: Business Integration Between ZHD and LINE
Business Integration Between ZHD and LINE ◼ After the business integration is completed, the JV (consolidated by SoftBank) between NAVER and SoftBank will own 65.3% of ZHD Post-Integration Structure ・SoftBank will have control of the majority of the board of directors (three out of five nominees) 50
Slide 36: Proposed Transaction Structure
Proposed Transaction Structure As of the commencement Tender offer for LINE shares/ Transfer of Integration of of transaction 100% subsidization ZHD shares ZHD and LINE business Joint tender offer and squeeze-out SB NAVER SB NAVER SB NAVER SB NAVER 13.7% 86.3% 100% 100% 50% 50% 50% 50% JV Shiodome-Z
Slide 37: SoftBank's Priority Issues (Materiality)
SoftBank’s Priority Issues (Materiality) ◼ Identified priority issues (materiality) to contribute to the achievement of Sustainable Development Goals (SDGs) Building society and Connecting people to Creating new business issues through Solving social industry through information to create through op
Slide 38: SoftBank
SoftBank