Slide 1: Financial Results Briefing Material FY2022 Q1
Financial Results Briefing Material FY2022 Q1 (ended Mar 31st, 2022) Neural Pocket Inc. May 13th, 2022 Copyright © Neural Pocket Inc. All Rights Reserved. 1
Slide 2: Agenda
• Business overview and highlights • Updates per service domain • Growth strategy Copyright © Neural Pocket Inc. All Rights Reserved. 2
Slide 3: Company mission
Company mission “Update the world for a better tomorrow” Copyright © Neural Pocket Inc. All Rights Reserved. 33
Slide 4: Proprietary AI libraries and technologies
Neural Pocket possesses proprietary AI libraries/ technologies to enable the AI-ization of society and 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 estimatio
Slide 5: Edge AI versus cloud AI
We develop "Edge AI" that solves issues traditional cloud AI faces The company possesses many technical assets and knowledge related to “Edge AI" which has many advantages over traditional cloud AI, namely low cost, low latency, low power consumption, and enhanced privacy protection. Cloud AI Edge A
Slide 6: Our vision of AI Smart Cities
Our vision of AI Smart Cities We believe that AI technology has the power to enrich our daily lives. Until now, there have been various Line-of-sight Occupancy Fashion Voice recognition Natural language Intruder detection Ad distribution kinds of waiting times in our daily lives. In the suburbs, we
Slide 7: Smart city AI service market expected to reach 1T USD
Smart city-related AI service market is expected to reach 1T USD The industrial market related to AI in general is expected as 87 trillion yen in Japan (2030). In addition, the Smart City market, is expected to be worth 100 trillion yen worldwide, with massive investments into the space. Collective
Slide 8: Our management team
Our management team Name Career overview Former Partner at McKinsey, working in 11 countries including Japan, Germany, and the U.S as CEO 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 through AI. He hold
Slide 9: History of Neural Pocket
History of Neural Pocket The company has been developing multiple AI services in succession. Further acceleration through 2 recent M&As. 1st term 2nd term 3rd term 4th term 5th term (FY2018 ended Dec.) (FY2019 ended Dec.) (FY2020 ended Dec.) (FY2021 ending Dec.) (FY2022) Service related milestones 1
Slide 10: NETTEN Inc. became a wholly owned subsidiary
NETTEN Inc. became a wholly owned subsidiary starting Feb. 21 Signing ceremony on Feb. 21, 2022. Left: Roi Shigematsu, Neural Pocket CEO; Right: Takashi Ueda, CEO of NETTEN Inc. Comment from Roi Shigematsu, CEO, Neural Pocket Comment from Takashi Ueda, CEO (current: Chairman), NETTEN Inc. Since foun
Slide 11: Introducing NETTEN Inc.
Introducing NETTEN Inc. Top share of domestic market for LED signboards. With 10 locations nationwide, the company possesses unique sales know-how and a maintenance infrastructure. Company overview Digital signboard – Installed examples ※Brand name for LED signages produced by NETTEN Inc. Name NETTE
Slide 12: Pursuing business synergies with NETTEN
Pursuing business synergies with NETTEN Neural Pocket Group NETTEN Inc. (Prior to acquiring NETTEN) ※General Construction Permit (Telecommunications construction AI digital signage, Digital signboards Key products smart city AI solutions (LED signage) Customers/ Large corporations, Mid-small size co
Slide 13: FY2022 Q1 highlights
FY2022 ending Dec. Q1 highlights The company has further accelerated growth through a second M&A. We are make solid progress in scaling the business while maintaining high profitability. Revenue growth Profitability Employees*1 Q1 Net sales 513M JPY Q1 Gross profit 351M JPY As of Mar. 31st, 2022 Net
Slide 14: Net sales quarterly trajectory
Net sales quarterly trajectory The company has established three service domains, whilst steadily growing sales. After fortifying services in preparation for scaling last year, we plan to initiate scaling phase from this fiscal year. Initiation Fundamental development of Establishment of AI services
Slide 15: TTM net sales trajectory
TTM (trailing-12-month) net sales*1 trajectory Continued sales growth through expansion and development of services. Achieved 39% QoQ TTM net sales. +39% (QoQ) 1,236 DigiSolution 185 AI Media 1,035 1,010 Lifestyle 925 887 220 230 207 145 185 762 112 216 237 638 266 241 544 111 442 110 286 821 120 31
Slide 16: Gross profit quarterly trajectory
Gross profit quarterly trajectory Gross profit is a crucial financial indicator following net sales. The company achieved 41% QoQ growth. Gross profit margin (% of net sales) 64% 65% 64% 81% 93% 93% 88% 81% 87% 77% 81% 64% 69% +41% (QoQ) 351 (million JPY) 250 237 203 162 157 152 152 144 102 58 40 21
Slide 17: FY2022 Q1 consolidated financials
FY2022 ending Dec. Q1 consolidated financials Net sales and gross profit grew significantly. Profits declined in the short term due to progressive investments in the second half of the year and in anticipation of growth in the next fiscal year. Profitability is expected to increase with future sales
Slide 18: Revised consolidated financial forecast
FY2022 ending Dec. revised consolidated financial forecast Revised earnings forecast in light of NETTEN becoming a wholly owned subsidiary and the expected synergies to be generated in the short term with our AI services. Profit forecasts are unchanged, as the company plans to continue to make inves
Slide 19: FY2022 financial forecast
FY2022 ending Dec. financial forecast The company has made significant progress toward achieving this fiscal year's business target. We continue to work toward achieving business target, including M&As. Target 4,000 (million JPY) +217% 3,200 Revised forecast Net sales EBITDA Previous forecast (annou
Slide 20: FY2022 quarterly forecast (illustrative)
FY2022 ending Dec. quarterly forecast (Illustrative) Revenues and profits are expected to increase toward the second half of the fiscal year due to business growth during the fiscal year, timing of service delivery and revenue recognition, and the impact of consolidation intake. Net Sales Gross Prof
Slide 21: Applying AI technology across 3 domains
Applying AI technology to create unique value across 3 domains We are creating a convenient society by applying our core AI technology to various fields. The company's main service domains are "Digi-Solution Service" in the social infrastructure field; "AI Media Service" in the signage media service
Slide 22: Org change from Jan 2022
Org change from Jan 2022 Introduced org change effective Jan 2022 to allow for each of our three service domains, “Digi-solution services” “AI media services” “Lifestyle services” to pursue scale independently. We have also appointed 4 new executive officers as we implemented the org change. Board o
Slide 23: Public appearances at public organization events
Public appearances at many public organization sponsored events Participation in events to promote our visibility and presence in the field of AI-enabled urban development. AI technology ▪ AI Innovation AWARD2022 “Future envisioned by Smart Cities” ▪ HONGO AI 2021 Judge ▪ Soft Bank World 2021 Presen
Slide 24: List of member organizations
List of member organizations Leading AI smart city activities as an active member of various industry associations. Smart City related Ministry of Land, Infrastructure, Transport and Tourism Smart City Public-Private Partnership Platform Kamakura City Smart City Public Private Sector Research Associ
Slide 25: Consolidated full-time employees
Consolidated full-time employees*1 Since inception, the organization has been steadily expanding with focus on attracting engineering talent. 70% of employees are comprised of engineers as for the parent company Neural Pocket Inc, attracting global talent from over 7 different countries. 156 52 38 4
Slide 26: Company group structure
Company group structure AI Test Field Singapore Branch (Est. Jul. 2021) (Est. Apr. 2020) Ownership 100% Established 100% Acquired in 100% Acquired in Oct. 2021 Nov. 2021 Feb. 2022 Neural Engineering Inc. Focus Channel Inc. NETTEN Inc. Established Oct 1st, 2021 Sep 1st, 2017 Aug. 20th, 2003 Business
Slide 27: Agenda: Digi-Solution Services
• Business overview and highlights • Updates per service domain • Digi-Solution Services • AI Media Services • Lifestyle Services • Growth strategy Copyright © Neural Pocket Inc. All Rights Reserved. 28
Slide 28: Digi-Solution Service
Digi-Solution Service We are expanding our track record of actual implementation beyond demonstration experiments in both the private and public sectors. With the acquisition of NETTEN, we are now able to provide outdoor signage services, expanding the range of our solutions. AI x Social Infrastruct
Slide 29: Contributing in urban development projects across Japan
Contributing in many urban development projects across Japan AI solutions are being deployed nationwide across both the private and public sectors. Examples of integration into actual facility operations are common increasingly contributing to urban development. Q1 new installations Muroran City • R
Slide 30: Digi-Solution: Examples of installations
Digi-Solution: Examples of installations DigiPark DigiPark DigiFlow RemoDesk (Commercial, roadside stations) (Logistics facility) Camera-based vacancy monitoring Utilization visualization system at a In-store customer count and Security risk management in a large system at large shopping facility di
Slide 31: Business scheme with Neural Engineering Inc.
Business scheme: Utilizing Neural Engineering Inc. to accelerate installation and expansion Digi Solution Services often involve installation of equipment. We plan to expand the number of sites/ installation through utilizing our subsidiary, Neural Engineering Inc., and through collaboration with ou
Slide 32: Cumulative units installed for Digi-Solution services
Cumulative number of units installed for Digi-Solution services DigiPark and DigiFlow has seen steady expansion and achieved the target of 150 unit installations by the end of Q1. 154 units 105 units 90 units 16 units 24 units FY2021 Q1 FY2021 Q2 FY2021 Q3 FY2021 Q4 FY2022 Q1 Copyright © Neural Pock
Slide 33: Overview of Digi-Solution's key services
Overview of Digi-Solution’s 2 key services We offer a variety of AI detection functions under two product lines, DigiPark and DigiFlow. Setup is designed according to the site’s needs and provides solutions with stable quality. AI detection menu AI device offering (partial list) DigiPark Occupancy A
Slide 34: Market environment for Digi-Solution Services
Market environment: There is a vast market for Digi-Solution Services to be adopted across urban spaces A vast market is identified for Digi-Solution Services across various location types, where the potential number of locations for further installation is enormous. (Number of potential installatio
Slide 35: NETTEN's LED Signage
NETTEN’s LED Signage LED signages are being utilized for both facility and store *Actual examples announcements and for lifestyle proposals in a variety of of installations by NETTEN Inc. situations Wall Portable Government Sleeve Pillar Fire Station In-window Roadside Chain stores Police Station Co
Slide 36: Over 10,000 locations installed nationwide
10 year track record Large corporations, government offices, commercial facilities, and private stores. We have installed in more than 10,000 locations nationwide across industries and use cases LED Vision Domestic #1 Sales 10,000+ locations nationwide Unparalleled track record Experience in a wide
Slide 37: Sales and maintenance organization nationwide
Sales and maintenance organization with 10 locations nationwide We have maintenance staff on duty throughout Japan, and we have also partnered with maintenance support companies to allow for stable operations. Niigata Installation Osaka HQ Sendai Tokyo HQ Hiroshima Fukuoka 大阪営業部 Nagoya Yokohama Main
Slide 38: Source of high quality and cost competitiveness
Source of high quality and cost competitiveness Our unique procurement, production, and logistics network enables us to achieve high quality and durability for outdoor installations, as well as industry leading cost competitiveness. Overseas factory Domestic Distribution Center Copyright © Neural Po
Slide 39: Characteristics of NETTEN LED Signage
Characteristics of NETTEN LED Signage We provide outdoor LED signages with various customized functions to meet customers' requirements. Full color video Automatic ON/OFF timer Scheduled broadcasting function Weatherproof construction Automatic brightness adjustment Copyright © Neural Pocket Inc. Al
Slide 40: LED technology appeal
LED technology appeal High-quality LED vision for displaying facility and store notices, lifestyle suggestions, etc. LEDs that express attractive images Copyright © Neural Pocket Inc. All Rights Reserved. 41
Slide 41: Easy video editing software
Easy video editing software to assist users By using our dedicated video editing software, you can go from "making videos seems difficult" to creating content in no time at all Copyright © Neural Pocket Inc. All Rights Reserved. 42
Slide 42: Proposal for chain stores
Proposal for chain stores We can flexibly meet customers' various specifications and installation needs by combining our various LED modules. Building walls In-window Sleeves Portable Copyright © Neural Pocket Inc. All Rights Reserved. 43
Slide 43: Proposals for large facilities
Proposals for large facilities We support LED displays of various sizes, including large- scale event venue visions and large-scale indoor/outdoor wall signages Unit Size Options We offer large scale displays and 3D displays 4m 12m ※The photo is an illustration and may differ from how it looks in re
Slide 44: Agenda: AI Media Services
• Business overview and highlights • Updates per service domain • Digi-Solution Services • AI Media Services • Lifestyle Services • Growth strategy Copyright © Neural Pocket Inc. All Rights Reserved. 45
Slide 45: AI Media Service
AI Media Service We are steadily increasing the number of installed digital signages ever since Focus Channel became a subsidiary in Nov. 2021. We are actively installing new systems to become a large signage media in Japan. AI x Social Infrastructure “DigiPark" a parking lot and DigiPark DigiFlow m
Slide 46: Media concept
Medial concept Announcements from the property owner and lifestyle- oriented content along with advertisements are shown across high-end residential spaces Copyright © FOCUS CHANNEL Inc. All Rights Reserved. 47
Slide 47: Media overview
Media overview We deliver the advertiser's message to residents of high-end urban condominiums. Apartment Signage Ads Reaching 150K affluent consumers in Tokyo region Market No. 1 Impression Outstanding reach even during covid Frequency Located in living spaces and repeatedly appealing to residents
Slide 48: Apartment list (1/2)
Apartment list (1/2) ザ・東京タワーズ（シータワー） KDXレジデンス白金I KDXレジデンス戸越 コンフォリア森下リバーサイド ザ・東京タワーズ（ミッドタワー） KDXレジデンス白金II KDXレジデンス品川シーサイド キャナルスクエア豊洲 ザ・東京タワーズ（ミッドタワー賃貸棟） ＭＦＰＲコート赤坂見附 エスティメゾン大井仙台坂 KDXレジデンス豊洲 勝どきザ・タワー Wat's白金 エスティメゾン品川シーサイドⅠ ＭＦＰＲコート木場公園 パークタワー晴海 アーバンパーク麻布十番 エスティメゾン品川シーサイドⅡ ＵＵＲコート錦糸町 ザ・晴海レジデンス アーバンフラッツ芝浦
Slide 49: Apartment list (2/2)
Apartment list (2/2) KDXレジデンス半蔵門 カスタリア北上野 レジデントプレイス西葛西 ロイジェントパークス千葉中央 スペーシア秋葉原 カスタリア三ノ輪 エスティメゾン代沢 パークスカイタワー・松戸 パークハビオ飯田橋 レジディア新御徒町Ⅱ Brilliaist三軒茶屋(アイビーテラス) レフィールオーブ南行徳駅前 フォレシティ秋葉原 エスティメゾン秋葉原 Brilliaist三軒茶屋(ブラッサムテラス) KDXレジデンス湘南台 レジディア九段下 コンフォリア浅草橋 コンフォリア駒場 コスモハイム元住吉 レジディア水道橋 ザ・パークハビオ上野レジデンス ザ・パークハビオ三
Slide 50: User attributes
User attributes Repeatedly reach a fashion-conscious and highly motivated segment of the business community. Household income 70% of the residents exceed an annual household 20Mln~ 2000万円以上〜 Below 8Mln 800万円未満 income of 10 million yen. 7% 9% Most of the apartments are family-oriented, where there is
Slide 51: Advertisement impact
Advertisement impact High brand lift effect, contributing to improved recognition and understanding of products and services Understanding of characteristics of services Cognitive change regarding advertising and products （％） （％） approx. 2.8 X approx. 3.7 X Total 64% Total 62% 17% 32% Total 23% Tota
Slide 52: Business scheme for apartment signage business
Business scheme for apartment signage business Today, being the media owner, we can take a more proactive role in managing the media, collaborating with advertising agencies, and expanding the business at an accelerated speed. Media side Advertiser side management companies associations, residents P
Slide 53: Digital signage unit installation trajectory
Digital signage unit installation trajectory Progress made in the number of units installed, with the number of commercial installations increasing by more than 100 units in Q1. The ratio of commercial installations to total installations also increased. installations 384 Trial 31 345 301 313 32 286
Slide 54: Per signage annualized unit economics
Per signage annualized unit economics Average revenue per signage temporarily increased to coincide with the busy advertising season at the end of March. Pre-acquisition by Neural Pocket approx. 600K JPY approx. 540K JPY Annual unit economics per signage is… approx. 400K JPY Reve- nue Communication,
Slide 55: Digital signage expects significant growth
Market environment: Digital signage expects significant growth Outdoor (OOH) advertising is the third largest market after TV advertising. Out of which, digital signage is particularly expected to grow, and tailwinds are expected to continue. Domestic advertising market trend*1 Digital signage marke
Slide 56: Potential for digital signage across urban locations
Market environment: Huge existing potential for digital signage installation across various urban locations There is an inexhaustible list of potential locations for digital signages to be installed across the city. Growth is expected both through increase in share among existing OOH advertising*1 a
Slide 57: Characteristics of Neural Pocket's AI signage
Characteristics of Neural Pocket’s AI signage We developed AI signage equipped with (1) remote control and management functions for advertising and (2) effectiveness measurement functions that solve current issues in the outdoor advertising market. EdgeAICamera Large LCD Facility info display & ads
Slide 58: Remote content distribution and terminal management
Remote content distribution and signage terminal management Our in-house content management system (CMS) enables remote control of all signage terminals at once, ensuring smooth content distribution and stable operation. IoT signage operation at the world's highest level is achieved. Proprietary con
Slide 59: Agenda: Lifestyle Services
• Business overview and highlights • Updates per service domain • Digi-Solution Services • AI Media Services • Lifestyle Services • Growth strategy Copyright © Neural Pocket Inc. All Rights Reserved. 60
Slide 60: Lifestyle Service
AI Media Service Business has remained strong across the fashion domain. We are providing a wide range of customized DX support to individual apparel companies beyond our AIMD offering. AI x Social Infrastructure “DigiPark" a parking lot and DigiPark DigiFlow mobility solution provided to private co
Slide 61: DX services for apparel companies adjacent to AIMD
Developing DX related services for apparel companies adjacent to “AIMD” Starting with our fashion trend analysis service “AIMD”, and combining our e-commerce recommendation engine along with our in-store AI digital signages, we are enabling a new O2O*1 experience. Quantitatively visualizing Digital
Slide 62: Agenda: Growth strategy
• Business overview and highlights • Updates per service domain • Growth strategy Copyright © Neural Pocket Inc. All Rights Reserved. 63
Slide 63: Business growth image
Business growth image Since the company’s public listing in 2020, we have been pursuing the below growth image. We are aiming to start dramatically scaling from this fiscal year. • Formulate company vision based on Self-propelling sales the expansion of services (view p.6 of growth in this document)
Slide 64: Direction of business growth
Direction of business growth The company was founded as an industry agnostic AI tech company. This allows us expand services and execute M&As across industries, to then become a comprehensive AI service provider. In addition to organic growth, we plan to pursue opportunities in peripheral areas that
Slide 65: 3-year business growth target
3-year business growth target We aim to achieve growth by leveraging our core edge AI technologies and services, and acquiring related services in Japan and overseas in an orderly manner. In addition to organic business growth, we plan to execute roughly two M&As per year creating synergies that wil
Slide 66: Aiming to become a comprehensive AI service provider
Aiming to become a comprehensive AI service provider Through applying our diverse edge AI technologies across multiple domains, we aim to become a comprehensive AI service provider. Advertisement, Real Estate, Media Social infra- structure Application Transpor- Retail/ tation, Apparel Logistics Publ
Slide 67: FY2022 revenue forecast and target
FY2022 ending Dec. revenue forecast and target The company is aiming to quadruple sales through organic growth, pursuing synergies across the group, and further M&A. (million JPY) 4,000 Target Digi-Solution M&A AI Media Lifestyle 3,200 Other 430 560 Revised revenue forecast 1,010 2,210 763 207 112 2
Slide 68: FY2022 Q1 consolidated balance sheet
FY2022 Q1 ended Mar. consolidated balance sheet The company intends to strengthen its financial base over the mid-term to enable further acceleration of growth investments, including M&A. (million JPY) 4,603 4,603 Cash and cash equivalents*1 1,613 現金及び預金 Interest bearing debt 3,035 1,449 Other curre
Slide 69: 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 70: Copyright © Neural Pocket Inc. All Rights Reserved.
Copyright © Neural Pocket Inc. All Rights Reserved. 71