Neural Group Inc. · TSE:4056
Neural — Q2 FY2024 Earnings Presentation
36 slides from Neural's earnings presentation, Aug 9, 2024
Slide 1: Financial Results Briefing Material, 7th term Q2 ended June 30, 2024
Update the world for a better tomorrow Financial Results Briefing Material 7th term, Q2 ended June 30, 2024 Neural Group Inc. August 9, 2024 Copyright © Neural Group Inc. All Rights Reserved.
Slide 2: Financial highlights of FY2024 (7th term) Q2
Financial highlights of FY2024 (7th term) Q2 • [Summary] Following the establishment of proprietary AI services in FY2023, both revenue growth and profitability strengthened significantly in FY2024. Business continued to expand steadily into Q2, with profitability reaching the break-even point. Prof
Slide 3: Overview of Neural Group; Financial highlights and business model; Growth strategy
• Overview of Neural Group Financial highlights and business model • Financial highlights and business model Growth strategy • Growth strategy Copyright © Neural Group Inc. All Rights Reserved. 2
Slide 4: Management team
Management team Founder & CEO, Roi Shigematsu, Advisor, Yutaka Matsuo • Partner at McKinsey & Company. • Professor, Artificial Engineering Research Center, • Led private equity investments at Bain Capital. Graduate School of Engineering, The University of Tokyo • Advisory Board of The Faculty of Eng
Slide 5: We develop proprietary AI libraries and edge implementation technologies for AI smart cities
We develop proprietary AI libraries/ edge-related implementation technologies to enable AI smart cities People attribute analysis People emotion and thought analysis Gender/ age Line-of-sight Facial expression, Voice/ emotion Natural language Facial recognition Fashion analysis estimation detection
Slide 6: AI technology is evolving along with the industry's growth
AI technology is evolving along with the industry’s growth Cloud AI Edge AI Conventional approach Our approach Original data (video, etc.) before AI analysis Metadata after AI analysis (text data) Real-time marketing and security data AI analysis in a large cloud server Shift Large scale Small scale
Slide 7: Edge AI has a large global market size and high growth potential
Edge AI has a large global market size and offers high growth potential. The Edge AI market is growing We operate in many of the key at an annual rate of 33.3% growth segments Global: Edge AI Market, in USD billions Global: Breakdown of Edge AI Market by Industry (2023) Our business fields 2,698 CAG
Slide 8: Our AI libraries operate on a variety of technical standards
Our AI libraries operate on a variety of technical standards, contributing as an Edge AI Platform developer As an NVIDIA Metropolis Partner, we actively adopt the NVIDIA Jetson series. Processor JETSON Xavier NX JETSON Nano JETSON TX2 OS Language Processor OS Language Copyright © Neural Group Inc. A
Slide 9: Continuing advanced AI research
Continuing advanced AI research: By continually integrating new technologies into our services, we accelerate platformization and generalization, while also contributing to building barriers to market entry. Image generation AI model Multitask AI model Uncompromising AI accuracy • Cutting-edge AI te
Slide 10: Edge AI & Smart City Solutions
Neural Group solves social issues in cities through Edge AI and enhances spatial value. Edge AI & Smart City Solutions Mobility, traffic control Safety and efficiency using Edge AI Fashion trend analysis using image AI Number plate and vehicle detection Work style reform and human capital utilizatio
Slide 11: Providing services for smart city development using AI cameras
Providing services for smart city development using AI cameras. For outdoor flat parking lots, a single camera can capture over 100 parking spaces. Congestion analysis based on line counting at parking lot entrances and exits is also available. 1 Real-time availability management 2 3 Guiding drivers
Slide 12: Visualizing vehicle movement through license plate analysis
Visualizing vehicle movement and stay information through license plate analysis of moving vehicles. AI reads license plates when passing detection lines AI acquires the following information ➢ Vehicle location ➢ Device/Camera ID ➢ Classification # ➢ Vehicle passing time ➢ Hiragana ➢ Vehicle passing
Slide 13: Real-time detection and notification of pedestrians and vehicles
At parking lot exits, roads, etc., real-time detection and notification of pedestrians and vehicles by direction is possible. Real-time direction Instant notification detection by Edge AI to digital signage AI replaces traffic guides in labor shortage situations, Pedestrian Approaching improving cos
Slide 14: Released a 1-on-1 support service to improve employee work comfort
Released a 1-on-1 support service to improve employee work comfort and accelerate their growth. 1-on-1 support services Examples of Customers KizunaNavi uses state-of-the-art AI analysis technology to improve the quality of 1-on-1 meetings. M1＋ By facilitating effective 1-on-1s, we support the signi
Slide 15: Top share in Japan with more than 12,000 LED signage installations
Top share in Japan with more than 12,000 LED signage installations ➢ Unparalleled installation track record Experience in a wide variety of industries, LED Signage including large corps, government offices, No.1 commercial facilities, and merchant stores. ➢ Unparalleled track record of stable operat
Slide 16: Expanding AI-driven web businesses with ChatGPT
Expanding AI-driven web businesses with ChatGPT. Generative Web powered by ChatGPT Feature 1 Automatic Blog Feature 2 Multilingual Generation Conversion Function 3: Word-of-mouth Feature 4 SEO auto-reply Automation • Leveraging the extensive sales network of Neural Marketing Co. (a wholly owned subs
Slide 17: Partnered with many public and private organizations
Partnered with many public and private organizations to promote AI services through an extensive network. Industry groups General Incorporated Association Japan Parking Association Public-Service Corporation JAPAN INSTITUTE OF LOGISTICS SYSTEMS Collaboration with corporations Smart City related Mini
Slide 18: Appearances at seminars/events
Appearances at seminars/ events AI technology ▪ Tokyo Data Platform Convention Professional Advisor ▪ RX Japan NexTech Week2022【Fall】 Lecture title “Smart Cities Today” ▪ Macnica: Possibilities in Retail for Image Recognition AI Speaker on Image Recognition AI ▪ AI Innovation AWARD2022 “Future envis
Slide 19: Overview of Neural Group; Financial highlights and business model; Growth strategy
Overview of Neural Group • Overview of Neural Group • Financial highlights and business model Growth strategy • Growth strategy Copyright © Neural Group Inc. All Rights Reserved. 18
Slide 20: Consolidated financial results for Q2 ended June 30
Consolidated financial results for the Q2 ended June 30, 2024 – Profitability recovering at a rapid pace FY2023 FY2024 Increase/ Change in (JPY Millions) Q2 Actual Q2 Actual Decrease Percentage Revenue 772 880 +108 +14.0% Gross profit 507 579 +72 +14.2% Percentage of revenue 65.7% 65.8% EBITDA -177
Slide 21: Quarterly revenue
Quarterly revenue (JPY Millions) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 (2nd term) (3rd term) (4th term) (5th term) (6th term) (7th term) +14% 991 984 880 819 772 781 734 640 603 514 288 294 251 226 202 163 164 184 126 62 91 33 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 22: Quarterly SG&A cost
Quarterly SG&A cost • With the establishment of our proprietary AI services in FY2023, （JPY Millions） R&D and sales expenses required for service sales have been significantly streamlined. -144 • While sales increased by 14% YoY, （Annualized: -576) 728 quarterly SG&A costs were reduced by ¥144 milli
Slide 23: Relationship between revenue and OP (FY2023–FY2024 monthly results)
Relationship between revenue and OP (FY2023–FY2024 monthly results) （JPY Millions） Monthly operating profit Stabilized at a high 120 June contribution margin of 100 FY2023 60% during FY2023-24 80 FY2024 60 Breakeven point operating profit 40 increases by 60 20 with a sales increase of 100... Monthly
Slide 24: Evolution of our business models and quarterly operating profit
Evolution of our business models and quarterly operating profit performance. After six years since its founding, successfully （JPY Millions） established a scalable AI service structure. We started our business by We have shifted our business model We aim to turn developing AI algorithms and to focus
Slide 25: Financial results for FY2024 Q2
Financial results for FY2024 Q2 Reached break-even point in Q2 (Operating profit was achieved in June, the final month of the quarter). Successfully shifted to the profit and cash generation phase after two years of business investment from Q4 FY2021. On track to generate profits starting from Q3 (S
Slide 26: Strategic investments laid the foundation for future profit expansion
Strategic investments during this period, though resulting in temporary deficits, laid the foundation for future profit expansion and long-term growth. Our business model 【AI Service sale】 • Building an AI service requires 【 Image of profit expansion for each business model *1 】 not only the develop
Slide 27: Overview of Neural Group; Financial highlights and business model; Growth strategy
Overview of Neural Group • Overview of Neural Group Financial highlights and business model • Financial highlights and business model • Growth strategy Copyright © Neural Group Inc. All Rights Reserved. 26
Slide 28: Our growth strategy
Our growth strategy Revenue Business model AI technology expansion evolution exploration • Expand and • Enhance the • Implement cutting- accelerate recurring nature edge AI tech- profits by scaling of the revenue nologies in image proprietary AI model. and audio domains services. into proprietary •
Slide 29: APPENDIX
APPENDIX Copyright © Neural Group Inc. All Rights Reserved. 28
Slide 30: Corporate overview
Corporate overview Company Name : Neural Group, Inc. Established : January 22, 2018 IPO : August 20, 2020 (TSE Growth : 4056) Business Description : Developing AI services based on image and video analysis using proprietary AI algorithms and terminal processing technology. Headquarter : Tokyo Midtow
Slide 31: Historical revenue performance
Historical revenue performance (JPY Millions) 3,700 3,178 CAGR 2,878 +99% 1,010 762 311 60 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 (1st term) (2nd term) (3rd term) (4th term) (5th term) (6th term) (7th term) Copyright © Neural Group Inc. All Rights Reserved. 30
Slide 32: Consolidated full-year financial estimate for FY2024
Consolidated full-year financial estimate for FY2024 Progressing smoothly FY2023 FY2024 Increase/ Change in (JPY Millions) Actual Estimate Decrease Percentage Revenue 3,178 3,700 +522 +16.4% Gross profit 2,063 2,550 +487 +23.6% Percentage of revenue 64.9% 68.9% EBITDA -490 180 +670 - Percentage of r
Slide 33: FY2024 Q2 – Balance Sheet
FY2024 Q2 – Balance Sheet (JPY Millions) FY2023 FY2024 June 30 June 30 Current Asset 1,972 1,415 of which, 1,198 657 Cash and Deposits Fixed Assets 1,788 1,567 Total Assets 3,761 2,983 Total Liabilities 3,013 2,455 of which, 2,650 2,070 interest-bearing debt Net Assets 747 528 Copyright © Neural Gro
Slide 34: Capital and business alliances while expanding floating shareholders
Promoting capital and business alliances with operating companies while ensuring share liquidity by expanding floating shareholders General shareholders General shareholders floating shares*1 General shareholders floating shares floating shares 4.6% VC. angel 18.8% investor*2 29.6% 24.4% Total issue
Slide 35: Update the world for a better tomorrow
Update the world for a better tomorrow Neural Group, Inc. We named our company "Neural Group" to express our desire to provide inspiring services that transcend boundaries across a wide range of fields through the development of cutting-edge technologies, including AI. We aim to leverage edge AI tec
Slide 36: Disclaimer
Disclaimer Handling of the material This document contains forward-looking statements. These statements are based solely on the information available at the time the statements were made. Furthermore, such statements are not guarantees of future results and are subject to risks and uncertainties. Ac