Monex Group, Inc. · TSE:8698
Monex — Q1 FYE March 2019 Earnings Presentation
52 slides from Monex's earnings presentation, Jul 27, 2018
Slide 1: Financial Results for 1Q of Fiscal Year Ending March 31, 2019
July 27, 2018 (TSE 1st Section: 8698) Financial Results for 1Q of Fiscal Year Ending March 31, 2019 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 cons
Slide 2: Our Business Principles
Our Business Principles Always a step ahead of the “Y” in "MONEY," our name MONEX symbolizes our position as a forerunner in finance. In the face of an ever-changing future, the Monex Group utilizes state-of-the-art IT technologies and world-class financial expertise to design innovative ways of man
Slide 3: Table of Contents
Table of Contents Our Business Principles p. 1 Table of Contents p. 2 I. Highlights p.3 - p.11 II. Consolidated Performance p.12 - p.26 III. Business Update p.27 - p.39 IV. Mid- & Long-Term Initiatives p.40 - p.43 Appendix: Group Overview p.44 - p.51 2
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Initiatives Appendix. Group Overview 3
Slide 5: Business Overview 1/2
Business Overview 1/2 Increasing corporate value through steady development of global online brokerage business impelled by three mid-to-long term growth drivers. Steady development Three mid-to- Enhanced of online long term Corporate brokerage growth drivers Value businesses Monex, Inc. Crypto Asse
Slide 6: Business Overview 2/2
Business Overview 2/2 Steady development of online Three mid-to-long term Enhanced brokerage business growth drivers Corporate Value 2018/3EBITDA* ¥ 14.4 B Crypto Finance in a New Age 2018/3 Japan Trading volume via Japanese stock Asset Plays a central part of “New Financial EBITDA* trading platform
Slide 7: Highlights 1Q of FYE Mar. 2019 (3 months) 1/5
Highlights 1Q of FYE Mar. 2019 (3 months) 1/5 An increase in net financial income drove higher segment profits* in both Japan and US, despite lower transaction volumes Continuous growth of net financial income with larger margin trading balance after the fee table revision, despite lower brokerage c
Slide 8: Highlights 1Q of FYE Mar. 2019 (3 months) 2/5
Highlights 1Q of FYE Mar. 2019 (3 months) 2/5 Since the service suspension in January 2018, Coincheck, Inc. basically only allowed existing customers to sell their cryptocurrency. This limited revenue stream combined Crypto Asset with new costs to strengthen cyber security and internal controls resu
Slide 9: Highlights 1Q of FYE Mar. 2019 (3 months) 3/5
Highlights 1Q of FYE Mar. 2019 (3 months) 3/5 ◆Total operating revenue after deducting financial expenses and quarterly profit attributable to owners of the Company (JPY million) Total operating revenue after deducting financial expenses Quarterly profit before Quarterly profit attributable to owner
Slide 10: Highlights 1Q of FYE Mar. 2019 (3 months) 4/5
Highlights 1Q of FYE Mar. 2019 (3 months) 4/5 ◆Total operating revenue after deducting financial expenses and cost of sales and segment profit (JPY million) Total operating revenue after deducting financial expenses and cost of sales Quarterly profit before income taxes 6,000 4,791 4,236 4,619 4,223
Slide 11: Highlights 1Q of FYE Mar. 2019 (3 months) 5/5
Highlights 1Q of FYE Mar. 2019 (3 months) 5/5 ◆Total operating revenue after deducting financial expenses and cost of sales and segment profit Coincheck, Inc. joined (JPY million) Monex Group Total operating revenue after deducting financial expenses and cost of sales 1,500 Quarterly profit before i
Slide 12: Accounting for business integration of Coincheck, Inc.
Accounting for business integration of Coincheck, Inc. Under purchase accounting for the acquisition of Coincheck, Inc., no goodwill is recorded and the change in the fair value of contingent consideration* will affect future profit or loss - Cash : ¥ 3.6 billion Consideration - Fair value of contin
Slide 13: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Initiatives Appendix. Group Overview 12
Slide 14: YoY Comparison (3 months) Consolidated Performance
YoY Comparison (3 months) Consolidated Performance (JPY million) 1Q FYE Mar. 1Q FYE Mar. 2018 2019 Rate of Variance Reference (Apr. 2017 – (Apr. 2018– change Jun.) Jun.) Total operating revenue after P15: Analysis of Japan segment deducting financial expenses 10,836 12,358 1,522 14.0% P17: Analysis
Slide 15: YoY Comparison (3 months) Segment Performance
YoY Comparison (3 months) Segment Performance (JPY million) Japan US Asia Pacific Crypto Asset Investment 2018/3 2019/3 2018/3 2019/3 2018/3 2019/3 2018/3 2019/3 2018/3 2019/3 1Q 1Q 1Q 1Q 1Q 1Q 1Q 1Q 1Q 1Q Total operating revenue after deducting financial expenses 6,635 6,634 4,223 4,619 240 192 - 9
Slide 16: YoY Comparison: Analysis: Operating Revenue (Japan)
YoY Comparison (3 months) Analysis: Operating Revenue Japan：A change in pricing for margin trading led to more transaction and an increase in net financial income, which was offset by lower brokerage revenues impacted by a lower market volatility environment ■Total operating revenue after deducting
Slide 17: YoY Comparison: Analysis: SG&A (Japan)
YoY Comparison (3 months) Analysis: SG&A Japan : An increase in advertising expenses targeted to expand the customer base ■SG&A (compared to Apr. 2017 - Jun. 2017) (JPY million) 5,835 SG&A Total +4.1% (+228) 6,000 5,607 373 *figures in parenthesis is the variance from 1Q FYE Mar. 2018 (JPY million)
Slide 18: YoY Comparison: Analysis: Operating Revenue (USD)
YoY Comparison (3 months) Analysis: Operating Revenue (USD) US：Brokerage commissions increased due to account growth and higher market volatility. Increase in net financial income due to higher yields from rate increases on growing client cash balances ■ Total operating revenue after deducting finan
Slide 19: YoY Comparison: Analysis: SG&A (USD)
YoY Comparison (3 months) Analysis: SG&A (USD) US：Compensation and benefits increased due to remuneration expenses correlated to the Company’s stock price and an increase in human capital to support account growth ■SG&A (compared to Apr. 2017 - Jun. 2017) SG&A Total +6.6% (+2,486) (USD thousand) *fi
Slide 20: QoQ Comparison (3 months) Consolidated Performance
QoQ Comparison (3 months) Consolidated Performance （JPY million） 4Q FYE Mar. 1Q FYE Mar. Rate of 2018 (Jan.-Mar. 2019 (Apr.- Variance change Reference 2018) Jun. 2018) Total operating revenue after P21: Analysis of Japan segment 14,109 12,358 -1,751 -12.4% deducting financial expenses P23: Analysis
Slide 21: QoQ Comparison (3 months) Segment Performance
QoQ Comparison (3 months) Segment Performance (JPY million) Japan US Asia Pacific Crypto Asset Investment 2018/3 2019/3 2018/3 2019/3 2018/3 2019/3 2018/3 2019/3 2018/3 2019/3 4Q 1Q 4Q 1Q 4Q 1Q 4Q 1Q 4Q 1Q Total operating revenue after deducting financial expenses and 7,217 6,634 4,791 4,619 243 192
Slide 22: QoQ Comparison: Analysis: Operating Revenue (Japan)
QoQ Comparison (3 months) Analysis: Operating Revenue Japan : In the low trading volume environment, net financial income from margin trading increased due to the revision of commissions table ■Quarterly total operating revenue after deducting financial expenses and cost of sales Quarterly total ope
Slide 23: QoQ Comparison: Analysis: SG&A (Japan)
QoQ Comparison (3 months) Analysis: SG&A Japan : System related cost decreased without the one-time expense related to office rent recorded in 4Q FYE 2018 ■Quarterly SG&A (JPY million) 7,000 Quarterly SG&A -8.2％ (-524) 6,359 5,895 *figures in parenthesis is the variance from previous quarter 6,000 5
Slide 24: QoQ Comparison: Analysis: Operating Revenue (USD)
QoQ Comparison (3 months) Analysis: Operating Revenue (USD) US: Net financial income increased from both growing assets under custody and a hike in interest rates. Although still at strong levels, brokerage commissions declined due to the lower market volatility environment ■Quarterly total operatin
Slide 25: QoQ Comparison: Analysis: SG&A (USD)
QoQ Comparison (3 months) Analysis: SG&A (USD) US : SG&A increased by 2% (vs 4Q FYE 2018) after removing the impact of the one-time credit recorded in 4Q FYE 2018 ■Quarterly SG&A (USD thousand) Quarterly SG&A +6.6% (+2,513) 45,000 *figures in parenthesis is the variance from previous quarter 40,345
Slide 26: 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 distribution ◆ Summary of consolidated statement of financial position as of June 30, 2018 Assets Liabilities (*1) Non-current assets JPY 1
Slide 27: Shareholders' Distribution
Shareholders’ Distribution Total return ratio (*1) is 75% on a multi-year basis ◆Total return amount(*2) and total return ratio ◆Return on Equity ratio （million yen） 12,000 Amount of acquisition of own shares(left) 900% 15% Amount of dividends (left) Total return ratio(right) 103% 800% 12.9% 10,000
Slide 28: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Initiatives Appendix. Group Overview 27
Slide 29: Business Update Japan segment (1) Customer base expansion 1/2
Business Update Japan segment (1) Customer base expansion 1/2 Expanded customer base using our strength: an ability to develop new products For active traders - Over 12,000 account openings (+170% vs 1Q FYE 2018). Number of funded accounts and active accounts both increased by 30% (vs 4Q FYE 2018).
Slide 30: Business Update Japan segment (2) Customer base expansion 2/2
Business Update Japan segment (2) Customer base expansion 2/2 Monex for Wealth Creation Services with various product lineup Wealth Creation Service - Investment balance is about ¥ 40 B(*) including a wrap service (MSV LIFE) for individuals and investment entrusted by institutional investors - A lic
Slide 31: Business Update Japan segment (3) Customer base of Monex, Inc.
Business Update Japan segment (3) Customer base of Monex, Inc. Aiming to double equities commissions through acquisition of active traders as well as investors, Monex's main customer base Higher ratio than the average of the main online Larger than the average of the main online securities securitie
Slide 32: Business Update US segment (1)
Business Update US segment (1) Active account growth continues to set new records fueled, most recently, by newly simplified and streamlined onboarding tools and processes. ■ Expanded services and customer base - Record number of active accounts driving increased client assets totaling $ 5.4 B in 1Q
Slide 33: Business Update US segment (2)
Business Update US segment (2) ■ Strong account growth and favorable interest rates are providing a steady profit structure - Growth in active accounts and a hike in interest rate drove higher net financial income - Commission received + net financial income decreased by 5% from previous quarter as
Slide 34: Business Update Asia Pacific Segment
Business Update Asia Pacific Segment Explore business opportunities in Asia Pacific area ■ Launched online securities business operation in Australia - Monex Securities Australia Pty Ltd started the online securities business in Jan. 2018 - The company makes use of the system of the HK-based brokera
Slide 35: Business Update Crypto Asset Segment (1) Financial Updates
Business Update Crypto Asset Segment（1）Financial Updates Since the service suspension in Jan. 2018, Coincheck only allowed existing customers to sell their cryptocurrency. Segment loss was ¥ 0.3 B in 1Q 1Q FYE March 2019（Crypto Asset Segment・IFRS） 1Q FYE March 2019 （Billion yen） （3 months) Total ope
Slide 36: Business Update Crypto Asset Segment (2) Status of the Registration
Business Update Crypto Asset Segment（2）Status of the Registration Improvements in governance, internal control and internal audit in response to the business improvement order (Mar 8, 2018) Business Improvement Order Major Improvements Established governance by having Board, of which outside Drastic
Slide 37: Business Update Crypto Asset Segment (3) Potential for growth
Business Update Crypto Asset Segment（3）Potential for growth ■Potential for Growth ・ Coincheck has approximately 1.7 million users, a majority in the young generations. Customers’ financial assets and transactions per user are likely to increase over time ・ Due to its different age group of customers
Slide 38: Business Update Crypto Asset Segment (4) Vision
Business Update Crypto Asset Segment（4）Vision Four potentials: Fusion with a traditional finance. New financial conglomerate in a new age Innovation：New businesses/services utilizing block-chain technology Payment Service：Cryptocurrency as a payment tool to realize real-time and low-cost internation
Slide 39: Business Update Investment Segment (1)
Business Update Investment Segment （1） Investment Segment was curved out from Japan Segment since April 2018 ■ Monex Ventures, Inc. and MONEX EDISON Investment Limited Partnership ・ Overall return* of investments made since 2009 is approximately 8 times of invested capital (as of June 2018) * Gain o
Slide 40: Business Update Investment Segment (2)
Business Update Investment Segment （2） Expanding investments in Fintech companies Information platform PFM*/Crowd Accounting Online life insurance /Curation invested in 2006 investedin2009 invested in 2012 Listedon Mar. 2012 on TSE Mothers Listedon Oct. 2016 on TSE Mothers Listedon Sep.2017 on TSE M
Slide 41: IV. Mid- & Long-Term Initiatives
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Initiatives Appendix. Group Overview 40
Slide 42: MONEX's New Beginning announced on October 27, 2017
MONEX’s New Beginning announced on October 27, 2017 Redefine finance for a new era. Support everyone’s investment and economic needs Using block chain technology, execute all the tradings of financial products and every financial transactions in Future of safety and at low cost. Creating our own blo
Slide 43: Group strategy overview combined with crypto-asset business
Group strategy overview combined with crypto-asset business New financial conglomerate in a new age Traditional Financial New Financial Conglomerate Monex Group Conglomerate Bank Crypto-asset Bank Coincheck Monex, TradeStation, Securities Broker Global Online Brokerage Monex Boom, Monex Australia Pa
Slide 44: 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 45: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update IV. Mid- & Long-Term Initiatives Appendix. Group Overview 44
Slide 46: Group Overview
Group Overview Japan: 1.78M accounts, US: 100K accounts, HK: 10K accounts, Crypto Asset: 1.7M users. Global customer base as a group Aim for continuous growth in the online brokerage business and enhancement of crypto asset business* for retail investors as our core business Crypto Asset Segment
Slide 47: Group Overview－Revenues, Costs, Employees
Group Overview－Revenues, Costs: 60% from Japan, 40% from US; Employees: 40% in Japan, 60% in US (As of March 2018) ◆Total operating revenue after deducting financial expenses ◆SG&A by segment and by cost items by region and by business Others 2% Others 3% Financial income 9% Commissions Equities*1 p
Slide 48: Group Overview－Corporate value creation process
Group Overview－Corporate value creation process As experts in finance, our personnel strive to expand customer base using IT technology As of March 2018 47
Slide 49: Monex Group structure (As of June 30, 2018)
Monex Group (As of June 30, 2018) Listed Holding Company [Japan] [US/Europe] [Asia Pacific] Cryptocurrency exchange Online Securities Company service provider Monex International Limited Holding Company in Hong Kong TradeStation Group, Inc. Online Securities Company Holding Company in the U.S. Monex
Slide 50: Overview of Monex Group and Main Subsidiary Companies
Overview of Monex Group and Main Subsidiary Companies ■ Monex, Inc. (Tokyo, Japan) ■ TradeStation Group (HQ in Florida, U.S.) One of the major online brokerage firms in Japan Online securities group with award-winning trading technology - President : Oki Matsumoto development capabilities - Founded
Slide 51: History of Monex Group
History of Monex Group Japan U.S. Asia Pacific 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 Inter
Slide 52: Investors' Guide
Investors’ Guide ■Pursue returns to shareholders through ROE improvement ■Shareholders & indicators per share ◆ Our basic policy for shareholders distribution ◆Major shareholders and shareholder breakdown To provide returns to shareholders based on our business (as of Mar. 31, 2018) Monex Group, Inc
Monex Group — Q1 FYE March 2019 Earnings Presentation on 6ix