Slide 1: Financial Results Briefing Material FY2023 Q3
The above Images were created with the assistance of DALL·E 3 Financial Results Briefing Material FY2023 Q3 (ended Sep 30 , 2023) th Neural Group Inc. Translation of original Japanese version Nov. 10th, 2023 Effective June 1, 2023, Neural Pocket Inc. has changed its name to Neural Group Inc. Copyrig
Slide 2: Company profile and strengths; Upgrading business model; Appendix
• Company profile and strengths • Upgrading business model and profitability • Appendix Copyright © Neural Group Inc. All Rights Reserved. 2
Slide 3: Management team intro
Management team intro Founder & CEO Advisor Roi Shigematsu Yutaka Matsuo • Partner, McKinsey & Company, Tokyo Branch, • Professor, Artificial Engineering Research Center, Frankfurt Branch and Chicago Branch, prior to Graduate School of Engineering, The University founding the Company in 2018 of Toky
Slide 4: Company highlights
Company highlights GOOD DESIGN AWARD 2023 • Listed on the • May 2023 • Engineers from 7 • Develop and Growth Market of Technology countries provide numerous the Tokyo Stock Company Sales developing many unique edge AI- Exchange since Growth Ranking proprietary AI enabled services August 2020 Award (
Slide 5: 12 locations across Japan and Southeast Asia
Providing various edge AI services with operations throughout Japan and in Southeast Asia Neural Group (Thailand) Co,. Ltd. Sapporo Branch Across Japan Sendai Branch Southeast Asia Nagoya Branch 12 locations Neural Marketing, Abeno Harukas Osaka Sales HQ Tokyo HQ Hiroshima Branch Fukuoka Branch Grou
Slide 6: Membership in public/private organizations related to AI and smart cities
Membership in public/private organizations related to AI and smart cities Smart City related Ministry of Land, Infrastructure, Transport and Tourism Smart City Public-Private Partnership Platform Kamakura City Smart City Public Private Sector Research Association MaaS Social Implementation Promotion
Slide 7: Promoting edge AI technology with governments and private companies
Promoting edge AI technology with governments and private companies AI technology ▪ G7 Ministerial Conference on Digital Technology in Takasaki, Gunma: Corporate exhibit ▪ Public-private partnership conference for overseas expansion of startups, co-hosted by the Ministry of Economy, Trade and Indust
Slide 8: Proprietary AI libraries and edge implementation technologies
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 9: 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 10: Unique and comprehensive service offering leveraging edge AI
Established unique and comprehensive service offering leveraging edge AI capabilities Visualization Broadcasting Monetization of physical spaces in physical spaces in physical spaces Edge AI Camera Digital Signage OOH Advertisement AI MEDIA PROVIDER Edge AI camera Installation, operation, Owner and
Slide 11: Digi-Solutions unit installation growth (cumulative)
Digi-Solutions unit installation growth (cumulative) 2,286ユニット 1,988 1,738 1,531 1,520 DigiLook*1 1,265 1,254 1,024 806 980 547 317 644 106 406 496 454 456 473 SignDigi*2 485 526 384 103 121 185 95 301 278 293 DigiPark/ 154 178 192 229 260 DigiFlow etc.*3 87 16 97 24 90 105 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q
Slide 12: Track record of edge AI camera installations in Japan/Overseas
Extensive track record of edge AI camera installations in Japan/ Overseas Thailand Muroran city Traffic analysis at 3 Sendai city Regional revitalization with AI- Lotus's stores Visualization of enabled urban development human flow for facility operations Kashiwa-no-ha smart city Outdoor AI safety s
Slide 13: Top share in Japan with 10,000+ installations
Top share in Japan with 10,000+ examples of sales/ installations ➢ 10,000+ installation track record Experience in a wide variety of industries, including large corps, LED signage government offices, commercial Japan No. 1 facilities, and merchant stores ➢ Unparalleled track record of stable operati
Slide 14: Advertising operation business on large LED display
Advertising operation business on large LED display launched Oct. 2023 We launched an ad management business as a dedicated agency (media rep), utilizing our know ledge and sales network in ad sales, ad broadcasting, and operation through our Focus Channel operations Neural responsible of media reps
Slide 15: Quantifying advertising effectiveness with AI cameras
Quantifying advertising effectiveness with AI cameras Quantitatively proved that providing information on exhibits in Shurijo Park improves traffic flow and increases average time spent in the park. View of people flow analysis Guidance signage improves entry rate by approx. 10% Guidance signage Vid
Slide 16: Apartment signage media Focus Channel
Apartment signage media “Focus Channel” AI MEDIA PROVIDER Characteristics of apartment signages Total of 200+ buildings, resident population of 100,000+ Number of units in parentheses Mitsubishi Estaet • The Park House Nishi-Shinjuku Tower 60 (954) • The Park House Yokohama- Shinkoyasu Garden (497)
Slide 17: Focus Channel can reach 200,000+ affluent people
Focus Channel can reach 200,000+ affluent people in the Tokyo area AI MEDIA PROVIDER ➢ View count (Impressions) Steady reach regardless of seasons and externalities ➢ View frequency Located in living spaces and repeatedly appealing to all residents (View count per add slot: 1.5 million/ month) ➢ Tar
Slide 18: Focus Channel examples of broadcasted advertisements
Focus Channels examples of broadcasted advertisements AI MEDIA PROVIDER Copyright © Neural Group Inc. All Rights Reserved. 18
Slide 19: Launched new web page business using AI tech
Launched new web page business using AI tech (Launched in May 2023) Generative Web powered by ChatGPT Function 1 Function 2 Blog generation Auto language translate Function 3 Function 4 Auto reply to reviews SEO automization AI-powered CMS maximizes the effectiveness of web pages with no technical k
Slide 20: Entered Thailand market and introducing AI Smart City solutions
Entered Thailand market last year and introducing AI Smart City solutions With METI Minister Nishida at an event sponsored by METI, the Traffic volume analysis in city center Bangkok Meeting with the Governor of Bangkok Embassy of Japan, and True Group (Bangkok) Collaboration with Egg Digital, the d
Slide 21: Company profile and strengths; Upgrading business model; Appendix
• Company profile and strengths • Upgrading business model and profitability • Appendix Copyright © Neural Group Inc. All Rights Reserved. 21
Slide 22: From fee-based to unit-based sales
Announced strategy for business model transformation in spring 2021 ※Excerpted from FY2021 Q1 Financial Results Briefing Material (Published on May 14, 2021) From fee-based to unit-based sales In addition to expansion through individual contracts with companies/ governments, we aim to accelerate sel
Slide 23: Overview of business model transition
Overview of business model transition Fee-based business model Unit-based business model 空間の見える化 空間での情報発信 空間での収益化 AI licensing and contracted development Handful of large corp. Many customers and users Profitability Profitability GP margin 90% • Decline in GP margin 65% gross margins • Far greater m
Slide 24: Progress of shift from fee-based to unit-based sales
Progress of shift from fee-based sales to unit-based sales Details on following page FY’19 – FY’23 Focus on fee-based sales Transition to unit-based sales Ave. annual growth rate 3,200 (百万円) 2,878 Unit-based sales 2,758 139.8% 2,474 1,010 762 474 182 Fee-based sales 311 60 83 581 536 405 442 18.0% 2
Slide 25: Business model transition and reflection on past results
Business model transition and reflection on past results Capabilities acquired • With edge AI technology at its core, building out a comprehensive service group that "visualizes," "monetizes," and “broadcasts information" in physical spaces Scaling business • Constructing a business portfolio that a
Slide 26: Quarterly revenue trajectory
Quarterly revenue trajectory Focused on fee-based business Transition to unit-based business model Full year results Full year results Full year results Full year results Full year forecast Revenue 311 762 1,010 2,878 3,200 (YoY growth) (+417.3%) (+144.8%) (+32.4%) (+184.9%) (+11.2%) (YoY growth) +1
Slide 27: Sales ramp up trend for FY2023 and performance review
Sales ramp up trend for FY2023 and performance review • Experienced delays in devising a sales management system covering 12 locations Sales growth nationwide, ramping up productivity for newly hired personnel, the training of planned at the management personnel including middle-level managers, and
Slide 28: FY2023 review and results through Q3
FY2023 review and results through Q3 Original plan Results vs Plan • Hiring 70 sales • Achieved net increase staff and rapidly of 72 staff out of 3,757 Hiring growing team job applications (Results from Jan through Sep) • Ramp up within • Ramping up over 8-9 Ramping up 3 months of months, including
Slide 29: Cost efficiency improvement lowering break-even revenue
Cost efficiency improvement underway lowering break-even revenue Break-even Cost optimization measures revenue as currently underway of Q1-Q3 (360Mln JPY/M or 1,085 • Equipment procurement cost 1,085Mln JPY/Q) optimization 975 • Sales productivity improvement Break-even 819 revenue target • Review o
Slide 30: Operating profit trajectory: Reaching breakeven level in Q4
Operating profit trajectory: Reaching breakeven level in Q4 Focused on fee-based business Transition to unit-based business model Annual Annual Annual Annual Q1-Q3 Pro Forma*1 Operating profit -133 170 20 -311 -370 Establish basis for the company Transformation of business model and Reaching break-
Slide 31: Marginal profit margin as high as 56%
Under the new unit-based business model, our marginal profit margin is as high as 56% Relationship between revenue and operating Business model with high income (FY2023 results) marginal profit Monthly Operating profit (million JPY) Marginal profit margin • For every 100 increase in sales, operating
Slide 32: Company progressing towards profitability post business model transition
Company progressing towards profitability post biz model transition Company Biz FY2023 Net sales inception transition ending Dec. Operating profit Biz centered on Transition from AI service sales providing AI licenses providing AI licenses expansion to large companies to selling AI services (million
Slide 33: Building an exciting and inspiring future with AI
Building an exciting and inspiring future with AI Neural Group Inc. The company name "Neural Group" expresses our desire to provide unconventional services that transcend boundaries in a wide range of fields enabled by cutting-edge AI technologies. We will utilize edge AI across both real and virtua
Slide 34: Company profile and strengths; Upgrading business model; Appendix
• Company profile and strengths • Upgrading business model and profitability • Appendix Copyright © Neural Group Inc. All Rights Reserved. 34
Slide 35: Company overview
Company overview Company name Neural Group Inc. (TYO: 4056) Changed corporate name from Neural Pocket Inc. on Jun 1st, 2023 Established Jan. 22nd, 2018 Representative Roi Shigematsu Listed exchange Tokyo Stock Exchange Growth Market (listed since Aug. 20th, 2020) Headquarters Tokyo Midtown Hibiya, H
Slide 36: Management team
Management team Name Career overview Former Partner at McKinsey, working in 11 countries including Japan, Germany, and the U.S as Representative Director leader in IoT and AI field. Founded Neural Pocket in January 2018 with the goal of realizing the Roi Shigematsu digitization of the real world thr
Slide 37: Six key services provided by Neural Group
Six key services provided by Neural Group Analyzing people flow in Unique parking solution World's first fashion trend the city using AI cameras using AI cameras analysis enabled with deep learning AI MEDIA PROVIDER Digital signage media in 10,000+ LED signage Web page creation and 450 luxury apartm
Slide 38: Neural Group subsidiaries as of Sep 30, 2023
Neural Group (as of Sep 30th, 2023) Ownership 100% 100% 74% Thailand Neural Marketing Inc. Neural Engineering Inc. Neural Group (Thailand) Co., Ltd. Established Aug 20th, 2003*1 Oct 1st, 2021 Nov 4th, 2022 Business Development, fabless Installation, operation, and Sales of AI services and systems ma
Slide 39: Organization: divisional system by product/service
Organization: Since Jan 2022, the company has established a divisional system organized by product/ service Board of Directors CEO Technology Financial Marketing Digi-Solution Lifestyle Development Management Division Division Division Division Division Thailand Copyright © Neural Group Inc. All Rig
Slide 40: Capital and business alliances, expanding floating shareholders
Promoting capital and business alliances with operating companies while ensuring share liquidity by expanding floating shareholders ※Based on shareholders' register as of Jun 30, 2023 General shareholders/ General shareholders/ General shareholders/ floating shares*1 floating shares floating shares
Slide 41: Trajectory of full-time employees
Trajectory of full-time employees*1: Rapidly expanded headcount for sales staff within Neural Marketing Inc. through H1 achieving hiring plans Headcount increase breakdown • Neural Marketing Inc. +72 • Neural Group Inc. +7 +83 • Neural Group Thailand +4 265 257 (# of staff) ⇨ Aggressive investment i
Slide 42: Quarterly net sales trajectory per service domain
Quarterly net sales trajectory per service domain Net sales trajectory (million JPY) +12% 991 Digi-Solution Services Lifestyle/ Innovation Services 170 819 772 734 108 640 131 181 603 70 84 513 34 821 711 288 294 570 603 591 251 56 66 226 519 32 202 479 184 20 163 164 126 22 25 32 65 62 91 31 232 22
Slide 43: FY2023 Q3 consolidated Statement of Income
FY2023 Q3 ended Sep. consolidated Statement of Income FY2022 FY2023 Q1-Q3 Q1-Q3 Increase Increase (million JPY) ended Sep. ended Sep. Value Percentage Net sales 1,887 2,194 +306 +16.2% Gross profit 1,285 1,425 +139 +10.9% % of net sales 68.1% 65.0% EBITDA -61 -494 -432 - % of net sales -3.3% -22.5%
Slide 44: FY2023 Q3 consolidated balance sheet
FY2023 Q3 ended Sep. consolidated balance sheet (million JPY) FY2023 Q2 FY2023年 Q3 As of Jun 30th As of Sep 30th Total current assets 1,972 1,769 Cash and cash equiv. 1,198 979 Total non-current assets 1,788 1,711 Total assets 3,761 3,480 Total liabilities 3,013 2,962 Interest bearing debt 2,650 2,5
Slide 45: Revision of financial forecast for FY2023
Revision of financial forecast for FY2023 ending Dec. While the company achieved large-scale new hires, there were delays in the ramp-up of productivity of new sales hires, establishing sales management systems, and KPI management compared to initial expectations. Financial forecasts have been revis
Slide 46: 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
Slide 47: Copyright © Neural Group Inc. All Rights Reserved.
Copyright © Neural Group Inc. All Rights Reserved. 47