Neural Group Inc. · TSE:4056

Neural — Q2 2023 Earnings Presentation

60 slides from Neural's earnings presentation, Aug 10, 2023

Slide 1: Financial Results Briefing Material FY2023 Q2
Financial Results Briefing Material FY2023 Q2 (ended Jun 30th, 2023) Neural Group Inc. Translation of original Japanese version Aug 10th, 2023 Effective June 1, 2023, Neural Pocket Inc. has changed its name to Neural Group Inc. Copyright © Neural Group Inc. All Rights Reserved. 1
Slide 3: Highlights from FY2023 Q2 ended Jun.
Highlights from FY2023 Q2 ended Jun. Growth Profitability Sales Force Continuous growth with AI and Maintaining high GP margins AI startup with OOH signage market tailwinds making progress towards profitability large 150+ sales team Revenue growth Gross profit margin Group employees*1 +19% 66% 257 (
Slide 4: Business progressing toward full-year sales of 4.0 billion yen
Business progressing toward full-year sales of 4.0 billion yen where sales are weighted toward the second half of the year Net sales trajectory Actual Actual Actual Actual Forecast Annual net sales 311 762 1,010 2,878 4,000 (YoY growth) (+417.3%) (+144.8%) (+32.4%) (+184.9%) (+38.9%) (YoY growth) +2
Slide 5: Quarterly net sales trajectory per service domain
Quarterly net sales trajectory per service domain Net sales trajectory (million JPY) +21% 991 Digi-Solution Services Lifestyle/ Innovation Services 170 772 734 640 131 181 603 70 84 513 34 821 288 294 570 603 591 251 56 66 226 519 32 202 479 184 20 163 164 126 22 25 32 65 62 91 31 232 228 219 206 28
Slide 6: 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. +68 • Neural Group Inc. +4 +75 • Neural Group Thailand +3 257 （# of staff） ⇨ Aggressive investment in sa
Slide 7: FY2023 Q2 consolidated Statement of Income
FY2023 Q2 ended Jun. consolidated Statement of Income FY2022 FY2023 Q1-Q2 Q1-Q2 Increase Increase (million JPY) ended Jun.*1 ended Jun. Value Percentage Net sales 1,153 1,375 +221 +19.2% Gross profit 770 907 +136 +17.7% % of net sales 66.8% 66.0% EBITDA -87 -351 -264 - % of net sales -7.6% -25.6% Op
Slide 8: FY2023 Q2 consolidated balance sheet
FY2023 Q2 ended Jun. consolidated balance sheet (million JPY) FY2023 Q1 FY2023 Q2 As of Mar 31st As of Jun 30th Total current assets 1,593 1,972 Cash and cash equiv. 913 1,198 Total non-current assets 1,738 1,788 Total assets 3,332 3,761 Total liabilities 3,084 3,013 Interest bearding debt 2,712 2,6
Slide 9: Net sales, EBITDA and operating profit trend
FY2023 ending Dec. forecast +39% 4,000 2,878 Net Sales 1,010 762 311 60 EBITDA 203 112 196 -22 -182 -127 Operating 171 Profit 20 10 -183 -133 -311 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Act. Act. Act. Act. Act. Forecast (1st term) (2nd term) (3rd term) (4th term) (5th term) (6th term) Copyright ©
Slide 10: FY2023 ending Dec. consolidated forecast
FY2023 ending Dec. consolidated forecast FY2022 FY2023 ended Dec. ending Dec. Growth Growth (million JPY) results forecast Value Percentage Net sales 2,878 4,000 1,121 +38.9% Gross profit 1,849 2,650 800 +43.3% % of net sales 64.3% 66.2% EBITDA -22 196 218 - % of net sales -0.8% 4.9% Operating profi
Slide 11: Aug. 10th announcement of inventory errors
Aug. 10th announcement of inventory errors • Neural Marketing Inc. a subsidiary of the Company (made a subsidiary through M&A on February 21, 2022; company name at the time: Netten Corp.), has discovered an inventory error in its FY2022 Q4 and FY2023 Q1 financial statements and a corresponding error
Slide 13: Business growth themes for FY2023
Business growth themes for FY2023 Neural Pocket Group AI Digi-Solution • Management theme for FY2023 is “Scale and • Horizontal expansion across both the public and profitability” private sectors and install a total of 400 cumulative units by the end of FY2023 (278 → Scale unit-based revenue while m
Slide 14: Digi-Solutions unit installation trend (cumulative)
Digi-Solutions unit installation trend (cumulative) Continued unit base growth. Installation of advertising signage (Focus Channel) in condominiums resumed in Q2 and planning for gradual installation base growth. 1,988 units 1,738 1,531 1,265 1,254 DigiLook*1 1,024 806 980 547 317 644 106 406 485 52
Slide 15: Building a vertically integrated out-of-home AI media business
Building a vertically integrated out-of-home AI media business Out-of-home digital signage advertising value chain and our experience 10,000+ units installed nationwide １．Location ２．Signage ３．Installation & ４．Operation & selection provision construction maintenance Generative AI Original CMS Initiat
Slide 16: Advertising operation business on large LED display starting Oct. 2023
Advertising operation business on large LED display starting in Oct. 2023 We will launch our first ad management business outside of our own media "FOCUS CHANNEL," utilizing the knowledge and sales network in ad sales, ad broadcasting, and operations nurtured within "FOCUS CHANNEL," the condominium
Slide 17: Proprietary multimodal large-scale language model (LLM)
Announced proprietary multimodal large-scale language model in June ™ .LLM Completion or Application Application replacement of ChatGPT Generative Web Neural Designer Virtual Try-on powered by ChatGPT Blog post Auto reply to generation online reviews Multi-language SEO automization Company-generated
Slide 18: Launched new web business using ChatGPT
Launched new web business using ChatGPT, expecting sales of around 100 million yen in FY2023 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
Slide 19: Focus Channel resumed installation of new signages
As the Focus Channel brand penetration expands, we have gradually renewed installation of new signages in Q2 Press release from Focus Channel, Jul 18th 2023 • Promoting business expansion as the largest condominium signage media in Tokyo region by selectively resuming new installations • As brand re
Slide 20: Digi-Solution services introduced across Japan
Digi-Solution services introduced across Japan Key locations installed Hyogo Pref. Sendai city Prologis Park Inagawa 1&2 People flow in urban centers, Muroran city License plate detection evacuation center operation Regional revitalization with AI- optimization enabled urban development Kashiwa-no-h
Slide 21: Approach to refining services and identifying new market needs
Our approach to refining services and identifying new market needs Short feedback cycle achieved by selling and marketing directly to customers • Traffic of people/ vehicles vehicles/ pedestrians • License plate details Data collected by • Direction of traffic • # of persons/ vehicles • Duration of
Slide 22: Examples of DigiFlow installation locations
Examples of DigiFlow installation locations Okinawa Shurijo Castle Park (Apr. ‘24) Marunouchi Nakadoori, Tokyo (Apr. ‘24) Support for DX Urban development facility through management and visualization of operations human flow In collaboration with Supporting "safe and the Okinawa secure community Me
Slide 23: Progress toward implementing solutions in Thailand
Progress toward implementing solutions in Thailand across private, academia, and public sectors Partnership with Promotion of adopted JICA AI awareness activities in CP Group - Egg Digital Inc. supported projects*1 Thailand KOSEN-KMITLにて講演するニューラルグループタイランド CTO中野 • Partnership with Egg Digital, the d
Slide 26: AI industry expected to grow to overwhelming market size
AI industry is expected to grow to an overwhelming market size compared to other growth areas Global market size comparison (Billion USD) +1,718 2021 2030 1,812 +640 +553 679 702 +78 82 149 94 3 39 Web 3.0 Metaverse SaaS AI Emergen Research*1 Grand View Research*2 Allied Market Research*3 Grand View
Slide 27: Shift from selling AI tech to AI-enabled services
The AI industry is shifting from selling “AI tech itself“ to selling “AI- enabled services” AI tech provider：Selling AI itself Catering to the needs of individual companies, providing customized technology Project commission AI tech Sales of AI Revenue from clients experiments licenses share AI serv
Slide 28: AI technology evolving: cloud AI to edge AI
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 29: Adoption of edge AI accelerating at global leading companies
Adoption of edge AI technology is accelerating at many global leading companies NVIDIA DRIVE AGX Xavier Accelerate development of Ethos NPU series, Edge- edge devices for autonomous oriented chips specializing in driving to achieve low latency deep learning to achieve high- and safety unaffected by
Slide 30: Edge processing is rapidly expanding
Edge processing is rapidly expanding Total data processed at the edge vs in the cloud*1*2 Growth forecast Through 2018 to 2025 Through 2018 to 2025 175 ZB Edge CAGR*4 131 +69% Cloud 32 ZB*3 3 CAGR*4 44 29 +6% 2018 2025 *1 Source for Edge share: What Edge Computing Means for Infrastructure and Operat
Slide 31: Enabling smart cities with edge AI
We enable smart cities with edge AI – Our edge AI platform allows for the circulation and utilization of data in physical spaces Edge AI platform to manage smart cities AI technology Edge technology Privacy protection Smart City that Neural Pocket envisions Immediate parking, No restraints, Flowing
Slide 32: Neural Platform for AI software development and operations
Neural Platform is a comprehensive environment to facilitate AI software development and day-to-day operations Functions Image and overview Functions Image and overview ▪ Manage and provide AI services ▪ Real-time management of (AI models), such as people flow operational (alive/ dead) status of Equ
Slide 33: 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 34: 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 Examples of edge devices running our edge AI Processor JETSON Xavier NX JETSON Nano JETSON TX2 OS Language Processor OS Language Copyright © Neural Group Inc. All Rights Reserved. 34
Slide 35: Established position as an edge AI platformer
As business models in the AI industry diversify, we have established our position as an edge AI platformer Business model Edge AI Platformer AI service provider Cloud AI Service Selling AI-enabled services Scaling service AI tech provider Selling “AI tech itself” Commissioned Commissioned AI Develop
Slide 36: Accelerating growth since inception in edge AI market
In the rapidly growing edge AI market, we have been accelerating growth since inception Company growth strategy and expansion progress Track record Net sales M JPY 3,500 Focus Channel Inc., NETTEN Inc. consolidation Annual growth rate 3,000 since company founding Sep 2022 2,500 Parking mobility solu
Slide 37: AI platforms expected to emerge from Asia
AI platforms expected to emerge from Asia, where the development of smart cities are most rapid U.S. companies are hesitant towards the usage of AI in physical spaces Withdrawal from face recognition In Japan, legislation for business (Jun, 2020) AI utilization and it’s implementation is in progress
Slide 38: Capital and business alliance with Sony Corporation
Announced capital and business alliance with Sony Corporation *1,2 • Issued 690,000 new shares of common stock through third- party allotment Capital • Raised 670 Mln yen (payment completed May 12) alliance • Sony’s ownership will be 4.56%, becoming the Company's third largest shareholder. + • Excha
Slide 39: Signage industry experiencing tail winds
Aim of capital and biz alliance: Signage industry experiencing tail winds Key growth drivers of Domestic digital signage market trend*1 Digital Signage Market (Bln JPY) 1 Digital substitution of labor Annual growth • Tasks traditionally performed by people automated or digitized 20 Bln JPY • Evoluti
Slide 40: Aim of alliance: Signage biz and our vision
Aim of capital and biz alliance: Signage biz and our vision • Creating new advertising market and exciting urban spaces through the dev. of next-generation digital signage using AI technology • Business development in Japan and Southeast Asia • Develop and commercialize new businesses through collab
Slide 41: Aim of alliance: AI-based human attitude detection biz
Aim of capital and biz alliance: AI-based human attitude detection biz • As remote communication becomes more commonplace, work with Sony to explore and commercialize new services on a phased basis • Plans to develop new technology to interact with people through attitude detection and language gene
Slide 42: Capital and business alliances while ensuring share liquidity
Promoting capital and business alliances with operating companies while ensuring share liquidity by expanding floating shareholders Estimation taking into account the allotment to Sony Corporation (Payment procedure completed on May 12) ※Based on shareholders' register as of Dec 31, 2022 General sha
Slide 44: Company overview
Company overview Company name Neural Pocket Inc. (TYO: 4056) Expected to change corporate name to Neural Group Inc. on Jun 1 st, 2023 Established Jan. 22nd, 2018 Representative Roi Shigematsu Listed exchange Tokyo Stock Exchange Growth Market (listed since Aug. 20th, 2020) Headquarters Tokyo Midtown
Slide 45: 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 46: Neural Pocket Group
Neural Pocket Group Ownership 100% 100% 100% 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 manufacturing and
Slide 47: 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 Copyright © Neural Group Inc. All Rights Reser
Slide 48: Group operates 15 locations internationally
Neural Pocket Group operates 15 locations internationally, with the infrastructure to support the development of smart cities nationwide Neural Pocket Inc. locations Neural Group (Thailand) Co., Ltd. Neural Marketing Inc. locations Sapporo Branch Niigata Branch Singapore Branch Nagoya Branch Sendai
Slide 49: Appearances at seminars/events
Appearances at seminars/ events 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 Industry and Keidanren: Speaker ▪ Advantec
Slide 50: Membership in public/private organizations
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 51: LED Vision installation cases
LED Vision installation cases LED vision, which excels in visibility and spatial presentation, is used in various scenes throughout the city to promote sales at facilities and stores, and as a medium for people to encounter new information. Government, For large scale business operators For SMEs mun
Slide 52: DigiLook: Top share in Japan with 10,000+ installations
DigiLook: Top share in Japan with more than 10,000 installations #1 installations with more than 10,000 signages nationwide ➢ Unparalleled installation track record Experience in a wide variety of industries, including large corps, government offices, commercial facilities, and merchant stores LED s
Slide 53: Apartment Signage Focus Channel
Apartment Signage “Focus Channel” We deliver the advertiser's message to the residents of high-end urban apartments Entrance hall Elevator hall Lounge Reception Copyright © Neural Pocket lnc. All Rights Reserved. 53
Slide 54: Reaching approx. 200K residents of high-end apartments
Media characteristics We deliver the advertiser's message daily and repeatedly to approx. 200K residents of high-end urban apartments 420 buildings Approx. Approx. 80,000 households Impression Steady reach regardless of Apartment Signage Ads seasons and externalities Market No. 1 Frequency Located i
Slide 55: Established Thai subsidiary in Nov. 2022
Established Thai subsidiary in Nov. 2022, to participate in greenfield type urban development popular across Southeast Asia Neural Pocket Thailand (Bangkok office) and CRC Tower where the base is located ©P&T Group Company name Neural Group (Thailand) Co., Ltd. Representative Kazuma TAKENAKA, CEO/ M
Slide 56: Vast infrastructure investment expected in Thailand and SE Asia
Vast infrastructure investment expected in Thailand and SE Asia Urban population growth Urban development market size (over the past 10yrs)*1 (over the past 10yrs)*1 (millions) (trillion dollars) 60.1x 3.9x Urban dev. 58.50 9.55 across ASEAN 2.47 0.97 Japan ASEAN Japan ASEAN i Concentrated investmen
Slide 57: Rebranding the company name to Neural Group
5yrs since founding, we aim to expand our business and contribute to society - Rebranding the company name to "Neural Group" Feb 2023 Announcement Jun 1st Name change effective date Mar 2019 Series B Neural Group Inc. Jan 2018 Founding • Growing into one of the top Neural Pocket Inc. global companie
Slide 58: Building an exciting and inspiring future with AI
Neural Pockets celebrating 5 Years since founding and has updated it’s company name to reflect the breadth of business 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
Slide 59: 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

Neural Group — Q2 2023 Earnings Presentation on 6ix

Neural — Q2 2023 Earnings Presentation

Slide 1: Financial Results Briefing Material FY2023 Q2

Slide 2: FY2023 Q2 highlights

Slide 3: Highlights from FY2023 Q2 ended Jun.

Slide 4: Business progressing toward full-year sales of 4.0 billion yen

Slide 5: Quarterly net sales trajectory per service domain

Slide 6: Trajectory of full-time employees

Slide 7: FY2023 Q2 consolidated Statement of Income

Slide 8: FY2023 Q2 consolidated balance sheet

Slide 9: Net sales, EBITDA and operating profit trend

Slide 10: FY2023 ending Dec. consolidated forecast

Slide 11: Aug. 10th announcement of inventory errors

Slide 12: Business growth themes and AI service updates

Slide 13: Business growth themes for FY2023

Slide 14: Digi-Solutions unit installation trend (cumulative)

Slide 15: Building a vertically integrated out-of-home AI media business

Slide 16: Advertising operation business on large LED display starting Oct. 2023

Slide 17: Proprietary multimodal large-scale language model (LLM)

Slide 18: Launched new web business using ChatGPT

Slide 19: Focus Channel resumed installation of new signages

Slide 20: Digi-Solution services introduced across Japan

Slide 21: Approach to refining services and identifying new market needs

Slide 22: Examples of DigiFlow installation locations

Slide 23: Progress toward implementing solutions in Thailand

Slide 24: Copyright © Neural Group Inc. All Rights Reserved.

Slide 25: Appendix

Slide 26: AI industry expected to grow to overwhelming market size

Slide 27: Shift from selling AI tech to AI-enabled services

Slide 28: AI technology evolving: cloud AI to edge AI

Slide 29: Adoption of edge AI accelerating at global leading companies

Slide 30: Edge processing is rapidly expanding

Slide 31: Enabling smart cities with edge AI

Slide 32: Neural Platform for AI software development and operations

Slide 33: Proprietary AI libraries and edge implementation technologies

Slide 34: AI libraries operate on a variety of technical standards

Slide 35: Established position as an edge AI platformer

Slide 36: Accelerating growth since inception in edge AI market

Slide 37: AI platforms expected to emerge from Asia

Slide 38: Capital and business alliance with Sony Corporation

Slide 39: Signage industry experiencing tail winds

Slide 40: Aim of alliance: Signage biz and our vision

Slide 41: Aim of alliance: AI-based human attitude detection biz

Slide 42: Capital and business alliances while ensuring share liquidity

Slide 43: Appendix

Slide 44: Company overview

Slide 45: Management team

Slide 46: Neural Pocket Group

Slide 47: Organization: divisional system by product/service

Slide 48: Group operates 15 locations internationally

Slide 49: Appearances at seminars/events

Slide 50: Membership in public/private organizations

Slide 51: LED Vision installation cases

Slide 52: DigiLook: Top share in Japan with 10,000+ installations

Slide 53: Apartment Signage Focus Channel

Slide 54: Reaching approx. 200K residents of high-end apartments

Slide 55: Established Thai subsidiary in Nov. 2022

Slide 56: Vast infrastructure investment expected in Thailand and SE Asia

Slide 57: Rebranding the company name to Neural Group

Slide 58: Building an exciting and inspiring future with AI

Slide 59: Disclaimer

Slide 60: Copyright © Neural Group Inc. All Rights Reserved.