Monex Group, Inc. · TSE:8698
Monex — Q2 FYE March 2017 Earnings Presentation
46 slides from Monex's earnings presentation, Oct 28, 2016
Slide 1: Financial Results for 2Q of Fiscal Year Ending March 31, 2017
October 28, 2016 (TSE 1st Section: 8698) Financial Results for 2Q of Fiscal Year Ending March 31, 2017 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.7 II. Consolidated Performance p.8 - p.22 III. Business Update p.23 - p.30 IV. Mid- & Long-Term Strategy “Global Vision” p.31 - p.34 Appendix. Group Overview p.35 - p.45 2
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 3
Slide 5: Management's recognition of current business situation
Management’s recognition of current business situation Lower risk appetite of retail investors on the back of structural changes in the Japanese stock market Recognized necessity to rebuild the group’s business portfolio in the mid- and long-term Change in external - Decrease in stock trading vo
Slide 6: Highlights 2Q FYE Mar. 2017 (3 months)
Highlights 2Q FYE Mar. 2017 (3 months) Profitability enhancement in Japan segment are expected after the launch of new backbone brokerage system US segment will move into the black from 3Q onward - JPY 230 million net loss in 2Q (3months) due to business environment deterioration as well as Japa
Slide 7: Consolidated performance of 2Q FYE Mar. 2017
Highlights 2Q FYE Mar. 2017 (3 months) ■Consolidated performance of 2Q FYE Mar. 2017 Quarterly net loss due to operating environment deterioration both in Japan and the US ◆Total operating revenue after deducting financial expenses and quarterly profit attributable to owners of the Company Total ope
Slide 8: Consolidated performance of 2Q FYE Mar. 2017 (US, China)
Highlights 2Q FYE Mar. 2017 (3 months) ■Consolidated performance of 2Q FYE Mar. 2017 ◆Total operating revenue after deducting financial expenses and cost of sales, quarterly profit attributable to owners of the Company Total operating revenue after deducting financial expenses and cost of sales US (
Slide 9: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 8
Slide 10: YoY Comparison (6 months) Consolidated Performance
YoY Comparison (6 months) Consolidated Performance (JPY million) 2Q FYE Mar. 2016 2Q FYE Mar. 2017 Change (Apr. 2015 - (Apr. 2016 - Variance Note (%) Sep. 2015) Sep. 2016) Total operating revenue after Analysis of Japan segment: P11 26,450 20,100 -6,350 -24.0％ deducting financial expenses Analysis o
Slide 11: YoY Comparison (6 months) Segment Performance
YoY Comparison (6 months) Segment Performance (JPY million) Japan US China 2016/3 2017/3 Change 2016/3 2017/3 Change 2016/3 2017/3 Change 2Q 2Q (%) 2Q 2Q (%) 2Q 2Q (%) Total operating revenue after deducting financial expenses 17,225 12,743 -26.0％ 9,407 7,653 -18.6％ 479 338 -29.4％ and cost of sales
Slide 12: Analysis: Japan Segment Operating Revenue
YoY Comparison (6 months) Analysis: Japan Segment Operating Revenue Japan：Revenues decreased due to lower market trading volumes of stocks and FX ■ Total operating revenue after deducting financial expenses and cost of sales (compared to Apr. 2015 - Sep. 2015) （JPY million） 20,000 Within () changes
Slide 13: Analysis: Japan Segment SG&A
YoY Comparison (6 months) Analysis: Japan Segment SG&A Japan : System related expenses increased due to parallel operation of new / old backbone brokerage systems ■ SG&A (compared to Apr. 2015 - Sep. 2015) （JPY million） Within () changes from 2Q FYE Mar.2016 14,000 12,159 SG&A Total +4.6% ( + 537) 1
Slide 14: Analysis: US Segment Operating Revenue (USD)
YoY Comparison (6 months) Analysis : US Segment Operating Revenue (USD) US： Revenue remains unchanged from the previous year except for the effect of FX business sale ■ Total operating revenue after deducting financial expenses and cost of sales (compared to Apr. 2015 - Sep. 2015) Within () changes
Slide 15: Analysis: US Segment SG&A (USD)
YoY Comparison (6 months) Analysis : US Segment SG&A (USD) US：One time payment such as severance costs associated with headcounts reduction ■SG&A (compared to Apr. 2015 - Sep. 2015) （USD thousand） Within () changes from 2Q FYE Mar.2016 80,000 75,958 76,001 SG&A Total +0.1% (+ 43) 70,000 11,118 11,59
Slide 16: QoQ Comparison (3 months) Consolidated Performance
QoQ Comparison (3 months) Consolidated Performance （JPY million） 1Q FYE Mar. 2017 2Q FYE Mar. 2017 Change Variance Note (Apr.-Jun. 2016) (Jul.-Sep. 2016) (%) Total operating revenue Analysis of Japan segment: P17 after deducting financial 10,635 9,466 -1,169 -11.0％ Analysis of US segment (USD): P19
Slide 17: QoQ Comparison (3 months) Segment Performance
QoQ Comparison (3 months) Segment Performance (JPY million) Japan US China 2017/3 2017/3 Change 2017/3 2017/3 Change 2017/3 2017/3 Change 1Q 2Q (%) 1Q 2Q (%) 1Q 2Q (%) Total operating revenue after deducting financial expenses and 6,790 5,953 -12.3％ 3,976 3,677 -7.5％ 167 171 2.7％ cost of sales SG&A
Slide 18: QoQ Analysis: Japan Segment Operating Revenue
QoQ Comparison (3 months) Analysis: Japan Segment Operating Revenue Japan：Revenues decreased due to lower market trading volumes of stocks and FX ■Quarterly total operating revenue after deducting financial expenses and cost of sales （JPY million） Within () changes from prev. quarter 9,000 8,633 8,0
Slide 19: QoQ Analysis: Japan Segment SG&A
QoQ Comparison (3 months) Analysis: Japan Segment SG&A Japan : System related expenses increased due to parallel operation of new / old backbone brokerage systems ■Quarterly SG&A Within () changes from prev. quarter （JPY million） SG&A Total +0.4％ ( +24) 7,000 6,068 6,092 ■Others ( - 76) ■Advertising
Slide 20: QoQ Analysis: US Segment Operating Revenue (USD)
QoQ Comparison (3 months) Analysis : US Segment Operating Revenue (USD) US : Revenues decreased due to lower market trading volumes of stocks, futures and options market ■Quarterly total operating revenue after deducting financial expenses and cost of sales （USD thousand） Within () changes from prev
Slide 21: QoQ Analysis: US Segment SG&A (USD)
QoQ Comparison (3 months) Analysis : US Segment SG&A (USD) US : One time payment such as severance costs associated with headcounts reduction ■Quarterly SG&A （USD thousand） Within () changes from prev. quarter 45,000 40,774 SG&A Total -3.8% ( -1,455) 38,728 40,000 36,862 36,375 37,273 35,000 5,898 6
Slide 22: Summary of Statement of Financial Position
Summary of Statement of Financial Position The difference between “Net capital” and “Non-current assets” is the source of funds for investments and shareholders’ return ◆ Summary of consolidated statement of financial position as of September 30, 2016 Assets Liabilities (*1) Non-current assets JPY 8
Slide 23: Shareholders' Return
Shareholders’ Return Aim to achieve a total return ratio (*1) of 75% on a multi-year basis and an ROE 15% over the mid- and long-term ◆Dividend per share and total return ratio ◆Return on Equity ratio Interim dividends per share(left) （yen） Year-end dividends per share(left) Total return ratio(right
Slide 24: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 23
Slide 25: Japan Segment (1) Two initiatives of expanding customer base
Business Update Japan Segment (1) Two initiatives of expanding customer base Aim to expand the customers’ assets and commission share by two initiatives ◆Customers’ assets and trading turnover* of major online brokers** (FYE Mar. 2017 / as of Jun. 30, 2016) （Customer assets, JPY trillion） 10 Initiat
Slide 26: Japan Segment (2) Initiative1: Offering online discretionary investment service
Business Update Japan Segment (2) Initiative1: Offering online discretionary investment service Online discretionary investment service provided by Monex-Saison-Vanguard Investment Partners 3 courses of long-term investment; “Asset-Building course” “Asset-Utilization course” LIFE stands for “Long-te
Slide 27: Japan Segment (3) Initiative2: Launching our active trader business
Business Update Japan Segment (3) Initiative2: Launching our active trader business Japanese stock trading platform “TradeStation” went into full-scale operation ■ Our goal is to acquire 10% of the active trader market which accounts for 40% of total individual investor daily trade value*1 Target sh
Slide 28: Japan Segment (4) Monex, Inc.'s customer segment
Business Update Japan Segment (4) Monex, Inc.’s customer segment Higher active accounts ratio and higher customer assets per account compared with peers Lower margin trading ratio and lower brokerage commission revenue compared with peers Increase revenue by acquiring trader-type customers while r
Slide 29: US Segment (1)
Business Update US Segment (1) Focus on profitability enhancement despite lower interest rate and lower trading volume in the market ■Cost reduction - Headcount reduction of approximately 100 in April and July 2016. - Recognized income in September 2016 despite tough operating environment. - Cash sa
Slide 30: US Segment (2)
Business Update US Segment (2) ■ Net financial income improved by interest swap and reallocation of customers’ deposit ◆Customers’ assets in custody ◆Net interest income (*2) and US Federal Fund rate (USD million) Increase in customers’ assets in custody (USD million) （％） 4,000 (*1) 35 5 Customer As
Slide 31: China Segment
Business Update China Segment Continuing the strategy to create a business opportunity in China ■ Quarterly Financial Results of Monex Boom Securities (H.K.) :increased income due to recovery of trading value in H.K. - Stock trading value in 2Q (3 months) increased by 51% (QoQ /in H.K. market). Brok
Slide 32: IV. Mid- & Long-Term Strategy "Global Vision"
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” 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 L
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 *1 for Japan
Slide 35: System investments under Global Vision
System investments under Global Vision System-related assets peak out at FYE Mar. 2017 getting lower from FYE Mar. 2018. (JPY million) System related Assets* of Monex, Inc. 25,000 20,000 15,000 10,000 5,000 0 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3 Investment phase under Globa
Slide 36: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Strategy “Global Vision” Appendix. Group Overview 35
Slide 37: 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 38: Group Overview – Continuous growth over years
Group Overview – Continuous growth over 15 years Japan: 1.66M accounts, US: 78K 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 39: Group Overview – Revenues and employees by region
Group Overview－Revenues: 60% from Japan, 40% from US; Employees: 40% in Japan, 60% in US or China ◆Total operating revenue after deducting financial expenses ◆SG&A by segment and by cost items by region and by business Others 5% Others 2% Financial income 8% Commissions 1. Equities paid 8% 1. Option
Slide 40: Group Overview – Corporate value creation cycle
Group Overview－Corporate value creation cycle 39
Slide 41: Investments in FinTech
Continuing to create value from the viewpoint of Finance × IT × Retail Service 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
Slide 42: 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 43: Monex Group
Monex Group (As of October 28, 2016) Listed Holding Company [Japan] [US/Europe] [China] Online Securities Company Monex International Limited TradeStation Group, Inc. Holding Company in Hong Kong Holding Company in the U.S. Monex, Inc. Comprehensive investment service provider Online Securities Comp
Slide 44: 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 45: 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 46: 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, 2016) Monex Group, Inc
Monex Group — Q2 FYE March 2017 Earnings Presentation on 6ix