Monex Group, Inc. · TSE:8698
Monex — Q3 FY2016 Earnings Presentation
48 slides from Monex's earnings presentation, Jan 28, 2016
Slide 1: Financial Results for 3Q of Fiscal Year Ending March 31, 2016
January 28, 2016 (TSE 1st Section: 8698) Financial Results for 3Q of Fiscal Year Ending March 31, 2016 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. 8 II. Consolidated Performance p.9 - p.23 III. Business Update p.24 - p.30 IV. Mid- & Long-Term Strategy “Global Vision” p.31 - p.34 V. Topics p.35 - p.38 Appendix. Group Overview p. 39 - p.47 2
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Corporate Governance VI. Topics Appendix. Group Overview 3
Slide 5: Leading the industry as a FinTech pioneer
Leading the industry as a FinTech pioneer 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 DWM**/Robo-advisor MONEX INSIGHT DWM*
Slide 6: Management's recognition of the current situation
Management’s recognition of the current situation Migration to the internalized backbone brokerage system of Monex,Inc. Replacement of progressing as planned backbone brokerage - Improvement of the cost structure by internalizing system. Approx. 1 billion yen of system cost reduction per system (JPN
Slide 7: Highlights 3Q FYE Mar. 2016 (3 months)
Highlights 3Q FYE Mar. 2016(3 months) - Daily average trading value of retail investors for stocks including ETFs in the two stock Japan exchanges decreased by 16% QoQ. Monex, Inc.’s stock (including ETFs) brokerage segment commissions also decreased by 22% QoQ FX revenue down by 25% QoQ in line wit
Slide 8: Highlights (1): Consolidated performance of 3Q FYE Mar. 2016
Highlights (1) ■Consolidated performance of 3Q FYE Mar. 2016 Quarterly loss in consequence of JPY 2.4 B one-time cost in Japan segment ◆Total operating revenue after deducting financial expenses and quarterly profit attributable to owners of the Company (JPY million) 15,000 Total operating revenue a
Slide 9: Highlights (2): US segment kept profitability 2 quarters in a row
Highlights (2) ■Consolidated performance of 3Q FYE Mar. 2016 US segment kept profitability 2 quarters in a row ◆Total operating revenue after deducting financial expenses and cost of sales, quarterly profit attributable to owners of the Company (JPY million) 6,000 Total operating revenue after deduc
Slide 10: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 9
Slide 11: QoQ Comparison (3 months) Consolidated Performance
QoQ Comparison (3 months) Consolidated Performance （JPY million） 2Q FYE Mar. 2016 3Q FYE Mar. 2016 Change Variance Note (Jul. - Sep. 2015) (Oct. - Dec. 2015) (%) Total operating revenue after Analysis of Japan segment: P12 13,490 11,799 -1,691 -12.5％ deducting financial expenses Analysis of US segme
Slide 12: QoQ Comparison (3 months) Consolidated Performance by segment
QoQ Comparison (3 months) Consolidated Performance (JPY million) Japan US China 2016/3 2016/3 Change 2016/3 2016/3 Change 2016/3 2016/3 Change 2Q 3Q (%) 2Q 3Q (%) 2Q 3Q (%) Total operating revenue after deducting financial expenses and 8,633 7,495 -13.2％ 5,071 4,565 -10.0％ 215 176 -18.1％ cost of sal
Slide 13: QoQ Analysis: Japan Segment Operating Revenue
QoQ Comparison (3 months) Analysis: Japan Segment Operating Revenue Japan：Revenue decreased due to decreased stock and FX trading volumes ◆ Quarterly total operating revenue after deducting financial expenses and cost of sales (JPY million) Within () changes from prev. quarter （JPY million） 8,837 8,
Slide 14: QoQ Analysis: Japan Segment SG&A
QoQ Comparison (3 months) Analysis: Japan Segment SG&A Japan : SG&A decreased in spite of increased advertising expenses due to acquiring new accounts ◆ Quarterly SG&A（JPY million） Within () changes from prev. quarter （JPY million） Total 9,000 -0.4％（-24） 8,000 Others（-10） 7,000 5,848 5,824 Communica
Slide 15: QoQ Analysis: US Segment Operating Revenue (USD)
QoQ Comparison (3 months) Analysis : US Segment Operating Revenue (USD) US : Revenue down due to decreased trading volumes associated with lower volatility decreasing ◆ Quarterly total operating revenue after deducting financial expenses and cost of sales （USD thousand） Within () changes from prev.
Slide 16: QoQ Analysis: US Segment SG&A (USD)
QoQ Comparison (3 months) Analysis : US Segment SG&A (USD) US： Commissions paid, exchange and association dues decreased ◆ Quarterly of SG&A （USD thousand） Within () changes from prev. quarter （USD thousand） 45,000 Total 38,558 39,097 -1.3％（-487） 40,000 36,351 36,375 36,862 35,000 4,907 5,829 Others
Slide 17: YoY Comparison (9 months) Consolidated Performance
YoY Comparison (9 months) Consolidated Performance The amount equivalent to operating income up 35%.Bottom-line up 70% (JPY million) 3Q FYE Mar. 2015 3Q FYE Mar. 2016 Change Variance Note (Apr. - Dec. 2014) (Apr. - Dec. 2015) (%) Total operating revenue after Analysis of Japan segment: P18 32,878 38
Slide 18: YoY Comparison (9 months) Segment Performance
YoY Comparison (9 months) Segment Performance Revenue and profit increase in US contributed to consolidated performance (JPY million) Japan US China 2015/3 2016/3 Change 2015/3 2016/3 Change 2015/3 2016/3 Change 3Q 3Q (%) 3Q 3Q (%) 3Q 3Q (%) Total operating revenue after deducting financial expenses
Slide 19: YoY Analysis: Japan Segment Operating Revenue
YoY Comparison (9 months) Analysis: Japan Segment Operating Revenue Japan：Revenue up due to increased stock and FX trading volumes ◆ Total operating revenue after deducting financial expenses and cost of sales (compared to Apr. – Dec. 2014) （JPY million） Within () changes from 3Q FYE Mar.2015 （JPY m
Slide 20: YoY Analysis: Japan Segment SG&A
YoY Comparison (9 months) Analysis: Japan Segment SG&A Japan：Cost up due to parallel operation of new / old backbone brokerage systems ◆ SG&A (compared to Apr. – Dec. 2014) （JPY million） Within () changes from 3Q FYE Mar.2015 （JPY million） 25,000 Total +18.7％（+2,743） 20,000 17,446 Others（+374） 1,127
Slide 21: YoY Analysis: US Segment Operating Revenue (USD)
YoY Comparison (9 months) Analysis : US Segment Operating Revenue (USD) US：Revenue up due to higher volatility and enhanced net financial income ◆ Total operating revenue after deducting financial expenses and cost of sales (compared to Apr. – Dec. 2014) （USD thousand） Within () changes from 3Q FYE
Slide 22: YoY Analysis: US Segment SG&A (USD)
YoY Comparison (9 months) Analysis : US Segment SG&A (USD) US：‘Commissions paid, exchange and association dues’ and ‘Amortization and depreciation’ decreased due to the assignment of FX business “MT4” in previous fiscal year ◆ SG&A (compared to Apr. - Dec. 2014) （USD thousand） Within () changes from
Slide 23: Summary of Statement of Financial Position
Summary of Statement of Financial Position The difference between “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, 2015 Assets Liabilities (*1) Non-current assets JPY 977.4B
Slide 24: Basic Policy Regarding Shareholders' Return
Basic Policy Regarding Shareholders’ Return Aim to achieve a total return ratio (*1) of 75% on a multi-year basis. ◆Year-end dividend is to be paid out based on a 50% ◆Dividend per share and total return ratio of profit of the 2nd half of the year or 2% of annual Interim dividends per share(left) (1
Slide 25: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 24
Slide 26: Business Update Japan Segment (1)
Business Update Japan Segment (1) A solid customer base of investors who prefer asset building; Stable brokerage commission share maintained ■Comparison of 5 major online brokers* ◆Customer assets per account ◆Stock brokerage commission share (from 2Q FYE Mar. 2007 to 2Q FYE Mar. 2016) (from 2Q FYE
Slide 27: Business Update Japan Segment (2)
Business Update Japan Segment (2) Trading platform “TradeStation” in Japan to be introduced with the aim of acquiring “traders” and commission share By introducing a new Japanese equity trading platform ◆Margin trading ratio out of stock trading value ◆Brokerage commission revenue (2Q FYE Mar. 2016)
Slide 28: Business Update US Segment (1)
Business Update US Segment (1) Measures for continuous profitability ◆Quarterly profit attributable to owners of the Company ■Revenue increase (USD million) 1. Extended term of interest swap with nearly 10% increased amount (November 2015) 3 *See detail on next page 2 2. Revenue from B2B business US
Slide 29: Business Update US Segment (2)
Business Update US Segment (2) Net financial income improved by initiatives Interest rate swap to fix a part of future interest ：USD 7M / year income from customers’ deposit (Nov. 2015) Change of the bank managing customers’ assets ：USD 8M / year (Apr. 2015) Change of an investment product managing
Slide 30: Business Update US Segment (3)
Business Update US Segment (3) Increased active accounts and volatility contributes to the revenue 1pt increase in VIX will bring additional USD 3M revenue per year (based on a regression analysis of commission data during Jan. 2009- Dec. 2015) ◆Number of active accounts (excl. MT4 accounts) ◆VIX an
Slide 31: Business Update China Segment
Business Update China Segment Continuing the strategy to create a business opportunity keeping risk under control in China ■ Quarterly Financial Results of Monex Boom Securities (MBS) - No impact to balance sheet due to China Shock. H.K. stock trading value accounts for approx. 50% of the entire tra
Slide 32: IV. Mid- & Long-Term Strategy "Global Vision"
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 31
Slide 33: Mid- & Long-Term Strategy "Global Vision"
Mid- & Long-Term Strategy “Global Vision” “Mid- and long-term revenue growth” and “Fixed-type cost reduction” by shifting system developments from outsourcing to in-house ■ Mid- and long-term revenue growth Measures Progress and Achievements Launching a trading platform for Japanese active traders S
Slide 34: 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(*) for Japan
Slide 35: System investments under Global Vision
System investments under Global Vision Completed large-sized system investments in FYE Mar. 2017. Cutting back on investment amounts from FYE Mar. 2018 (JPY million) (Consolidated) Software and Software in progress 25,000 Software in progress Software 20,000 (※1) 15,000 10,000 5,000 0 2012/3 2013/3
Slide 36: V. Topics
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 35
Slide 37: Achievements in FinTech
Achievements in FinTech Continuing to create value from the viewpoint of Finance × IT × Retail Service since the company’s establishment Portfolio management tools equipped with a leading-edge financial engineering model for retail investors（Japan segment） - “MONEX VISION β”, a portfolio management
Slide 38: Broadening the retail investor base
Broadening the retail investor base Start offering wrap account service in spring 2016. Expecting to increase assets under management in the medium- and long-term Joint venture of Monex Group, Credit Saison, and Vanguard - A consolidated subsidiary established in August 2015, of which Monex Group ow
Slide 39: 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 40: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” V. Topics Appendix. Group Overview 39
Slide 41: 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 42: Group Overview – Continuous growth over years
Group Overview – Continuous growth over 15 years Japan: 1.61M accounts, US: 68K 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 43: Group Overview – Revenues by region, SG&A, employees
Group Overview－Revenues: 60% from Japan, 40% from U.S.; Employees: 30% in Japan, 70% in US or China ◆Operating revenue by region and by business ◆SG&A by segment and by cost items Others 2% Others 5% Financial income 1. Equities Commissions 2. System 10% FX 3% 30% paid 11% related costs China 1% Chi
Slide 44: Group Overview – Corporate value creation cycle
Group Overview－Corporate value creation cycle Business model United China Provide value to Japan States (Hong Kong) Business investment intended for sustainable stakeholders Global Vision High-quality customer base of Broaden the Capital markets Main 1 million active accounts customer customer Inves
Slide 45: Monex Group structure
Monex Group (As of January 28, 2016) Listed Holding Company [Japan] [U.S./Europe] [China] Online Securities Company Monex International Limited Holding Company in Hong Kong Online Securities Company TradeStation Group, Inc. Holding Company in the U.S. Monex, Inc. Online Securities Company Comprehens
Slide 46: 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 47: History of Monex Group
History of Monex Group Japan U.S. China (Hong Kong) 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
Slide 48: 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, 2015) Monex Group, Inc