Softbank Group Corp. · TSE:9984
Softbank — Q3 FY2020 Earnings Presentation
62 slides from Softbank's earnings presentation, Feb 10, 2021
Slide 1: Earnings Results for the Nine-month Period Ended December 31, 2020
Ver.1.4 Earnings Results for the Nine-month Period Ended December 31, 2020 Investor Briefing February 10, 2021 SoftBank Group Corp.
Slide 2: Disclaimers
Disclaimers This presentation provides relevant information about SoftBank Group Corp. (“SBG”) and its subsidiaries (together with SBG, the “Company”) and its affiliates (together with the Company, the “Group”) and does not constitute or form any solicitation of investment including any offer to buy
Slide 3: Exchange rates and abbreviations
Exchange rates used for translation FY2019 FY2020 Average during quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 USD 110.00 107.70 108.98 109.22 107.74 105.88 104.45 1 CNY 16.13 15.37 15.46 15.56 15.16 15.27 15.71 EOQ Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 1 USD 108.83 103.50 1 CNY 15.31 15.88 Ab
Slide 4: Finance
Finance SBG standalone financial numbers are calculated by excluding numbers of self-financing entities from the consolidated numbers, unless otherwise stated. Major self-financing entities are SBKK, Arm, SVF1, SVF2, Brightstar, PayPay, Fortress, SB Energy, etc.
Slide 5: Summary of FY2020 Q3
Summary of FY2020 Q3*1 Investment businesses performed robustly, especially at SVF. Diversifying assets portfolio while being firmly committed to our financial policies. Robust Gain on investments totaled ¥3.8T, mainly for SVF investment - Listings of DoorDash and Opendoor (in Q3) businesses - Net
Slide 6: Robust Investment Businesses
- Robust Investment Businesses - Status of Assets - Progress of ¥4.5T Program - Financial Condition - Financial Strategy - ESG Initiatives Finance 3
Slide 7: Increase in Gain on Investments
Increase in Gain on Investments Net income of ¥3.1T: Gain on investments at SVF1 & SVF2 increased significantly. Gain on investments Net income (attributable to owners of the parent) Investment Business SVF1 and SVF2 Other Total gain on of Holding Companies investments investments (¥ T) (¥ T) 4.5 4.
Slide 8: Main Investment Activities of SVF1 and SVF2
Main Investment Activities of SVF1 and SVF2 (since Oct 2020) Successful public listing of DoorDash, Opendoor, and Seer. Listing of a SBIA-sponsored SPAC (special purpose acquisition company). New listings Exited investments New investments SVF1 SVF1 SVF2 IPO Partially exited (December 9, 2020) NASDA
Slide 9: SBG Share Price and Credit Spread
SBG Share Price and Credit Spread Both share price and domestic bond yields stayed firm. SBG share price*1 SBG domestic senior bond yield*2 (YTD) As of Feb 5, 2021 (YTD) (%) 200 191 (SBG) 5.0 175 4.0 150 154 (Nasdaq) 3.0 125 110 (TOPIX) 2.0 100 109 (Dow) 1.0 75 ¥4.5T Program announced ¥4.5T Program
Slide 10: Status of Assets
- Robust Investment Businesses - Status of Assets - Progress of ¥4.5T Program - Financial Condition - Financial Strategy - ESG Initiatives Finance 7
Slide 11: Equity Value of Holdings
Equity Value of Holdings Excluding asset-backed Equity value of holdings marked at ¥26.9T, finance maintaining a high level. Composition (¥ T) 30.9 49％ Alibaba SBKK 26.3 26.9 7％ 13％ SVF1 4％ SVF2 24.3 6％ T-Mobile (formerly Sprint) 9％ Arm 18.6 8％ Investments in listed stocks 13.1 13.0 4％ Others 12.6 *
Slide 12: Alibaba Share Price Trend
Alibaba Share Price Trend Alibaba’s share price (listing to date) As of Feb 5, 2021 $265.7 Annual Growth Rate*1of 24% Alibaba’s stock price has risen at an annual rate of 24% since its listing, despite recent fluctuations. $68.0 Sep'14 Sep'15 Sep'16 Sep'17 Sep'18 Sep'19 Sep'20 *1 Calculated with the
Slide 13: SVF1 & SVF2: Cumulative Investment Performance
SVF1 & SVF2: Cumulative Investment Performance (SBG Consolidated Basis) Significant growth in asset values driven mainly by a greater demand for online services under COVID-19 and IPOs of portfolio companies. SVF1 SVF2 ($B) ($B) 120 104.9 B 10 9.3 B 100 84.5 B Exited*1 1.8x 8 80 Currently held 2.6x
Slide 14: SVF1 & SVF2: Gain (Loss) on Investments
SVF1 & SVF2: Gain (Loss) on Investments (SBG Consolidated Basis)*1 Recorded ¥1.4T gain on investments for FY20Q3. (¥ T) 1.4 T (sum of SVF1 and SVF2) 1.1 0.5 0.4 0.3 0.4 0.3 -0.9 -0.2 -1.1 FY18 FY18 FY18 FY19 FY19 FY19 FY19 FY20 FY20 FY20 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 *1 SVF1 and Other SBIA-Managed F
Slide 15: Strength of SBG's Investment Portfolio
Strength of SBG’s Investment Portfolio Diversified portfolio comprising leading tech companies with high liquidity Proportion of listed companies Arm Semicon (excluding asset-backed finance) Amazon Alphabet Facebook *2 Salesforce PayPal Microsoft SBKK Telecom 70% Investment T-Mobile Telecom in liste
Slide 16: Further diversifying assets as Alibaba's proportion declined
Strength of SBG’s Investment Portfolio Excluding asset-backed Further diversifying assets as Alibaba's proportion declined finance September 30, 2020 December 31, 2020 T-Mobile 3% T-Mobile 4% SBKK 4% Alibaba SBKK 6% Alibaba 6% Arm 7% 8% 60% Arm 49% 9% Investment in listed stocks 7% Investment in 12%
Slide 17: Investments in Listed Stocks: Investment Gain (Loss) for FY20 Q1-3
Investments in Listed Stocks and Other Instruments: Investment Gain (Loss) for FY20 Q1-3 Valuation gain (loss) + Realized gain (loss) ¥263.0B ¥13.2B Valuation gain ¥55.0B Realized gain ¥207.9B ¥188.1B -¥113.3B -¥577.6B -¥301.4B Actual stocks Actual stocks + Derivatives Total investment Investment lo
Slide 18: Investments in Listed Stocks: Actual Stocks
Investments in Listed Stocks and Other Instruments: Actual Stocks（as of December 31, 2020) ($ M) Fair value AbCellera Biologics 272 Adobe 10 Alphabet Class C 1,375 Amazon.com 7,386 Facebook 3,279 Microsoft 1,105 Netflix 582 Pacific Biosciences of California 238 PayPal Holdings 1,438 salesforce.com 6
Slide 19: Investments in Listed Stocks: Options
Investments in Listed Stocks and Other Instruments: Options (as of December 31, 2020) $13.8B (net) $44.32B $1.4B (net) Long call option of listed stocks $1.68B -$0.24B Short call option of listed stocks -$30.55B Fair value Notional principal Finance 16
Slide 20: Progress of ¥4.5T Program
- Robust Investment Businesses - Status of Assets - Progress of ¥4.5T Program - Financial Condition - Financial Strategy - ESG Initiatives Finance 17
Slide 21: ¥4.5T Program
¥4.5T Program Large-scale returns to shareholders and creditors by asset monetization Asset sale and monetization up to ¥4.5T Returns to Financial Shareholders Improvements Share repurchases Debt repayment up to ¥2T Bond buyback (¥2.5T in total with the amount Cash reserves announced on March 13, 20
Slide 22: Asset Monetization (¥4.5T Program)
Asset Monetization (¥4.5T Program) ¥4.5T asset monetization completed by September 2020; monetized ¥5.6T in just 6 months Prepaid forward Alibaba April to August contracts, etc. $15.4B $15.4B May Block trade *1 ¥0.3T SBKK September Offering *1 ¥1.2T $14.4B June to July Public offering, etc. $18.1B T
Slide 23: Debt Reduction
Debt Reduction To be implemented according to market conditions Corporate bonds and borrowings Repurchase of domestic bonds (July) *1 Total amount repurchased ¥167.6B (total face value) Early repayment of senior loan (September) Total amount repaid ¥300.0B Alibaba margin loan*2 Repayment by a wholly
Slide 24: Returns to Shareholders (Share Repurchases)
Returns to Shareholders (Share Repurchases) Reflecting NAV per share*1, SBG share price outperformed others. Share price performance Share repurchases of Japanese large-cap companies (March 19, 2020*3 ~ February 5, 2021) (Market cap, ¥ T) Authorized amount ¥2.5T #1 Toyota (25.8) (of which under ¥4.5
Slide 25: LTV Trend
LTV Trend Excluding asset-backed LTV trend*1 finance 25% • Rapid and large-scale monetization, taking full advantage of highly liquid 18.4% 17.9% assets 18.0% *2 • Agile financial management in 14.9% response to market 11.8% 9.0% conditions as articulated in the financial policy Moneti- Moneti- Prog
Slide 26: Financial Condition
- Robust Investment Businesses - Status of Assets - Progress of ¥4.5T Program - Financial Condition - Financial Strategy - ESG Initiatives Finance 23
Slide 27: LTV
LTV Excluding asset-backed finance 17.9% 14.9% Secured an even larger financial cushion with the progress of ¥4.5T program FY19Q4 FY20Q3 (Mar' 20) (Dec' 20) * Presented LTV ratios are as of the end of each quarter. * See "LTV Calculation: SBG Standalone Net Debt" and "LTV Calculation: SBG Standalone
Slide 28: Cash Position
Cash Position Always maintain ample cash position, more than sufficient for the bond redemptions for the next 2 years Cash position Bond redemption schedule *3 ¥2.0T *1, 2 （¥ B) Bond redemptions for the next 2 years (¥1.7T) ＞ 817.2 872.4 484.3 884.2 Dec' 20 Jan' 21 - Dec' 21 Jan' 22 - Dec' 22 Jan' 2
Slide 29: SBG Standalone Interest-bearing Debt
SBG Standalone Interest-bearing Debt*1 SBG standalone interest-bearing debt Main variance factors from September-end 2020 (excluding non-recourse debt) remains flat. Alibaba margin loan by SB Northstar (+¥618.8 B) Short-term borrowings by SB Northstar (+545.7B) Increase in financial liabilities rela
Slide 30: SBG Standalone Cash Position
SBG Standalone Cash Position Maintain ample cash despite continued shareholder returns and investments (¥ B) 4,601.6 3,437.5 2,175.0 SB Northstar (Cash and deposits and trading securities) 1,389.3 Cash position decreased significantly due to increase in securities pledged as collateral*2. Main varia
Slide 31: SBG Standalone Net Interest-bearing Debt
SBG Standalone Net Interest-bearing Debt*1 Increased through returns to shareholders based on Excluding SB Northstar ¥4.5T program and investments (¥ B) 7,641.9 6,463.0 6,528.9 6,240.1 Adjustments relating to finance 5,645.5 3,624.4 Asset-backed finance ( -¥3,599.1B) 1,426.4 Hybrid finance ( -¥25.2B
Slide 32: Issuance of Hybrid Bonds for Domestic Institutional Investors
Issuance of Hybrid Bonds for Domestic Institutional Investors SBG’s largest-ever issuance to domestic institutional investors. Considering hybrid bonds for retail investors in the future. Hybrid bonds for domestic institutional investors Bond redemption schedule 2016 2021 Issuance (¥ B) Domestic str
Slide 33: Bond Redemption Schedule
Bond Redemption Schedule Exploring various redemption options with refinancings as a main option (¥ B) Domestic straight bonds Amount procured in domestic Domestic subordinated bonds 177.0 hybrid bonds issued in Feb 2021 1,101.1 Domestic hybrid bonds 1,044.6 177.0 Foreign currency-denominated senior
Slide 34: Financial Strategy
- Robust Investment Businesses - Status of Assets - Progress of ¥4.5T Program - Financial Condition - Financial Strategy - ESG Initiatives Finance 31
Slide 35: Financial Strategy for FY2020
Financial Strategy for FY2020 Flexible financial management adapting to any change Agile financial Firmly keeping management in financial policy response to market conditions Finance 32
Slide 36: Firmly Keeping Financial Policy (1/2)
Firmly Keeping Financial Policy (1/2) 1. Manage LTV below 25% in normal times (upper threshold of 35% even in times of emergency) 2. Maintain cash position covering bond redemptions for at least the next 2 years 3. Secure sustainable distribution and dividend income from SVF and other subsidiaries F
Slide 37: Firmly Keeping Financial Policy (2/2)
Firmly Keeping Financial Policy (2/2): Our Policy on Supporting Portfolio Companies Portfolio company finances to be No rescue self-financing package Finance 34
Slide 38: Agile Financial Management in Response to the Market Conditions
Agile Financial Management in Response to the Market Conditions Achieving both shareholder return and financial improvement by implementing ¥4.5T Program Appropriately control the balance between new investments and exits (prepare for future investment opportunities) Financial management focused on
Slide 39: ESG Initiatives
- Robust Investment Businesses - Status of Assets - Progress of ¥4.5T Program - Financial Condition - Financial Strategy - ESG Initiatives Finance 36
Slide 40: SBG's Approach to ESG
SBG’s Approach to ESG (From Earnings Investor Briefing for FY20Q2) Continue essential initiatives for ESG • Take the initiative in addressing changing social issues and lead to trends in society • Continue to discuss what we should address and put them into practice Further strengthen the communicat
Slide 41: Responses to Climate Change
E: Environmental Initiatives Responses to Climate Change • Contributing to lay groundwork to disseminate renewable energy in Japan and abroad since 2011 • Actively promoting the reduction of greenhouse gas emissions FY20 Initiatives of Major Group Companies Arm Yahoo Japan SB Energy Declared Committ
Slide 42: Social Initiatives – Responses to COVID-19
S: Social Initiatives – Responses to COVID-19 – SBG Established SB Coronavirus Inspection Center Corp. (July 2020) • High quality saliva PCR test offered at no profit (¥2,000 per test) • Pioneering the establishment of private PCR testing centers to supplement tight public testing • Started providin
Slide 43: Social Initiatives - Information Security
S: Social Initiatives - Information Security - SBG • Taking a strong response to cyber threats surrounding the Group by utilizing advanced technologies; make information security a source of competitiveness • Through the Information Revolution, contribute to the safe and sound growth of the digital
Slide 44: Social Initiatives - Information Security: Zero Trust
S: Social Initiatives - Information Security - SBG “Zero Trust” overcomes the problems and risks of conventional perimeter network security model, and realizes the location and network free security Perimeter Network Security “Zero Trust” Intrusion Outside Attack/Risk Trust Check Engine Always prote
Slide 45: Enhancement on Governance - SBG
G: Enhancement on Governance - 1 SBG The Board of Directors resolved to strengthen the functions of the Nominating & Compensation Committee in January 2021. Before revision After revision As an advisory body to the Board of As an advisory body to the Board of Directors, deliberate and make Directors
Slide 46: Portfolio Company Governance and Investment Guidelines Policy
G: Enhancement on Governance - 2 SBG Portfolio Company Governance and Investment Guidelines Policy • January 2020: Adopted the Policy Recommended governance standards that SBG and Group companies are expected to seek when making new or additional investments in portfolio companies • January 2021:
Slide 47: Expansion of Information Disclosure
Expansion of Information Disclosure SBG SBKK Actively expanding information disclosure on our efforts to date • Expanding disclosure from CSR-centric information to one in line with international ESG standards • Published on website, sustainability report, etc. FY20 Key External Assessment Results 【
Slide 48: Appendix
Appendix
Slide 49: Direction of Financial Management (illustrative)
Direction of Financial Management (illustrative) • Conservative financial management with asset monetization in the COVID-19 market environment • Securing financial stability and preparing for future investment opportunities Value increases in the mid-term; Improving LTV Enables balancing elevated l
Slide 50: SBG Credit Rating Trend
SBG Credit Rating Trend Aim to improve credit rating under the investment holding company rating criteria Acquisition of Acquisition of Acquisition Acquisition Listing Japan Telecom Vodafone KK of Sprint of Arm of SBKK A+ 14 A 13 A- 12 JCR (A－) Outlook Stable BBB+11 BBB 10 BBB- 9 BB+ 8 S&P (BB＋) Out
Slide 51: LTV Calculation: SBG Standalone Net Debt
LTV Calculation: SBG Standalone Net Debt (L) Adjusted SBG standalone net debt*1 ¥4.02T (V) SBG standalone = 14.9% ¥26.91T equity value of holdings = - - Adjusted SBG Consolidated Net debt at self- Other adjustments standalone net debt net debt financing entities (¥ T) 4.02 12.39 4.74 3.62 SoftBank s
Slide 52: LTV Calculation: SBG Standalone Equity Value of Holdings
LTV Calculation: SBG Standalone Equity Value of Holdings (L) Adjusted ¥4.02T SBG Standalone Net Debt (V) SBG Standalone = 14.9% Equity Value of Holdings ¥26.91T SBG standalone Interest of SBG in Other, investments in holdings = Major shares + SVF1/SVF2 + listed stocks, etc. (¥ T) 26.91 19.22 4.56 3.
Slide 53: SVF1: Capital Commitment
SVF1: Capital Commitment (as of December 31, 2020) ($ B) 98.6 (84.5) SBG 33.1*1 （28.9） 65.5 （55.6） Third-party limited partners * Numbers in brackets represent amounts contributed. * The presented SBG’s committed capital to SVF1 includes approximately $8.2 billion of an obligation satisfied by using
Slide 54: SVF1 Snapshot
SVF1 Snapshot (as of December 31, 2020) 1. Gross Return to SVF1 is the sum of the cumulative Gross Realized Proceeds from exited and partially exited investments and Fair Market Value of unrealized investments held by SVF1 as of December 31, 2020. Gross Gain/(Loss) to SVF1 is the difference between
Slide 55: SVF1 Listed Portfolio Companies
SVF1 Listed Portfolio Companies (as of December 31, 2020) ※3 1. Listed company total only includes companies that have become publicly listed on or after the date SVF1 made its initial investment in the companies. The companies indicated as fully exited are fully exited companies that became publicl
Slide 56: SVF2 Snapshot
SVF2 Snapshot (as of December 31, 2020) 1. Gross Return to SVF2 is Fair Market Value of unrealized investments held by SVF2 as of December 31, 2020. Gross Gain/(Loss) to SVF2 is the difference between the Gross Return to SVF2 and Investment Cost to SVF2. Gross Realized Proceeds are before tax and ex
Slide 57: SVF2 Listed Portfolio Companies
SVF2 Listed Portfolio Companies (as of December 31, 2020) 1. Listed company total only includes companies that have become publicly listed after SVF2 made its initial investment in the companies. 2. Gross Return = Unrealized value. SBG’s return on any SVF2 portfolio company is not the full return am
Slide 58: Entry into Agreement for Sale of Shares in Arm to NVIDIA
Entry into Agreement for Sale of Shares in Arm to NVIDIA Remain committed to the long-term success of NVIDIA as a major shareholder (approximately 6.7- 8.1% ownership expected). Received by the Company as a deposit*1 Cash $2.0B Cash $10.0B To be received by the Company*2 Transaction upon closing val
Slide 59: Amendments of Collar Contracts
Amendments of Collar Contracts Amended the collar contracts to capture the upside potential. Transaction cost was recorded as a one-time loss. Before change of terms After change of terms Gain (loss) from collar Gain (loss) from collar transactions transactions Upside potential can be No further gai
Slide 60: Consolidated SBG: Interest-bearing Debt, Cash Position, and Net Debt
Consolidated SBG: Interest-bearing Debt, Cash Position, and Net Interest-bearing Debt Consolidated Interest-bearing Debt*1 (\ B) Dec.19 Mar.20 Jun.20 Sep.20 Dec.20 SBG standalone 7,969.0 8,281.3 9,803.6 9,319.8 11,218.9 Incl. SB Northstar - - - 364.3 1,528.8 SVF1 and SVF2 721.3 581.5 159.1 156.3 260
Slide 61: Consolidated SBG: Interest-bearing Debt, Cash Position, Notes
Consolidated SBG: Interest-bearing Debt, Cash Position, and Net Interest-bearing Debt Notes Consolidated Interest-bearing Debt *1 The presented interest-bearing debt only includes interest-bearing debt and lease liabilities to third parties and excludes deposits for banking business at The Japan Net
Slide 62: SoftBank
SoftBank