Softbank Group Corp. · TSE:9984
Softbank — Q3 FY2023 Earnings Presentation
51 slides from Softbank's earnings presentation, Feb 8, 2024
Slide 1: Earnings Results for the Nine-month Period Ended December 31, 2023
Earnings Results for the Nine-month Period Ended December 31, 2023 Investor Briefing February 8, 2024 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 per JPY used for translation FY2022 FY2023 Average during quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 USD 129.04 138.68 141.16 133.26 138.11 145.44 147.00 EOQ Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 1 USD 133.53 141.83 Abbreviations Abbreviations used in Finance section of this
Slide 4: Finance
Finance SBG stand-alone financial figures are calculated by excluding those of self- financing entities from the consolidated figures, unless otherwise stated. Major self financing entities includes SBKK (including its subsidiaries such as LY Corporation and PayPay), SVF1, SVF2, LatAm Funds, Arm, et
Slide 5: Current Market Environment
Current Market Environment With the decline in U.S. interest rates, the stock market remains robust, led by large-cap tech and semiconductor stocks. VC Index shows signs of recovery after being sluggish during the interest rate hike phase U.S. Interest Rates U.S. Stock Prices*1 Exchange Rate (USD/JP
Slide 6: Equity Value of Holdings: Stock Performance
Equity Value of Holdings：Stock Performance Our core assets stock prices performing steadily. Arm and Softbank KK outperformed the benchmark Stock Price Changes（Oct 2023 to date) 50% +44% 40% 30% +19% 20% +16% +15% +16% +10% 10% 0% NASDAQ NASDAQ総合 Arm TOPIX SBKK S&P500 T Mobile Tモバイル (Note) Created b
Slide 7: Historical NAV
Historical NAV NAV increased for four consecutive quarters (¥ T) 19.2 +¥5.3T 16.4 15.5 13.9 14.1 Q3 Q4 Q1 Q2 Q3 FY2022 FY2023 （Note）NAV (Net Asset Value) = Adj. SBG stand-alone equity value of holdings – adj. SBG stand-alone net interest-bearing debt Finance 4
Slide 8: Finance Summary in FY2023 Q3
Finance Summary in FY2023 Q3 Strong performance of listed assets contributed to NAV expansion. Financial stability remains unchanged NAV ¥19.2T (+¥2.8T QoQ) LTV 11.5％ (+0.9ppt QoQ) NAV・LTV Net Debt ¥2.5T (+¥0.5T QoQ) *1 Cash Position ¥4.4T (-¥0.7T QoQ) Financial No major financing activities activit
Slide 9: Breakdown of NAV Increase
Breakdown of NAV Increase Equity value of holdings, primarily listed stocks, has increased. No significant change in net interest-bearing debt QoQ (¥T) +¥2.8T *1 Arm ： +3.0 SVF1+2 ： +0.6 T-Mobile ： +0.4 Others ： +0.4 （Decrease of Interest-bearing debt） （Note）NAV (Net Asset Value) = Adj. SBG stand-al
Slide 10: Investment Return on Sprint
Investment Return on Sprint Achieved significant return. Holding equity value equiv. to ¥1.9T* (¥ T) Equity IRR MOIC 26% 8.2x (Deutsche Telekom) (As of Dec 31, 2023) 5.0 5.0 Monetization, etc. 3.1 (Sales, Asset-backed financing, etc.) 2.1 3.4 Borrowings 1.9 Equity value of holdings* (As of Dec 31, 2
Slide 11: Equity Value of Holdings (FY2022Q3-FY2023Q3)
Equity Value of Holdings (FY2022Q3-FY2023Q3) Value of Arm increased by ¥4.3T over the past year. Telecom sector stocks are also performing strongly. All assets steadily achieved growth in value 21.7 (¥ T) Net of asset-backed Completion of finace Alibaba monetization 18.4 16.9 16.9 6.9 15.9 4.3 2.0 0
Slide 12: Portfolio's Core Asset Shifts from Alibaba to Arm
Portfolio’s Core Asset Shifts from Alibaba to Arm Alibaba monetization and the rise in Arm value contributed. Simultaneously, portfolio diversification progressed compared to the end of 2020, and geopolitical risks also decreased Net of asset- Proportion of 75% 57% 44% 73% backed finance listed shar
Slide 13: Proportion of Listed Shares
Proportion of Listed Shares Proportion of listed assets has recovered greatly through Arm IPO. Liquidity of portfolio is at an extremely high level Net of asset- backed finance Unlisted 25% 27% 43% 56% Listed 75% 73% 57% 44% Dec 2020 Dec 2021 Dec 2022 Dec 2023 *Proportion of listed shares includes s
Slide 14: Shifting to AI with a focus on Arm
SBG Share Price From China related to Semiconductor / AI May 11 148 Semiconductor Stocks (SOX) (Q4 Earnings Results) Announced completion of 143 SBG Alibaba monetization 127 Nikkei 225 Shifting to AI with 100 a focus on Arm 82 Chinese Stocks (MSCI China) May 2023 Jul 2023 Sep 2023 Nov 2023 Jan 2024
Slide 15: Invested Amounts (SVF1 + SVF2 + LatAm Funds + SBG)
Invested Amounts (SVF1 + SVF2 + LatAm Funds + SBG) Resumed investment, focused on uncovering superior opportunities ($B) 2.5 SBG 0.2 1.8 1.5 0.9 SVF1+ SVF2+ 2.3 LatAm 1.1 0.5 0.5 0.5 0.1 0.1 0.2 0.9 0.3 0.4 0.4 0.4 0.2 0.3 0.1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (Note) FY2022 FY2023 Invested amounts by SBG: Invest
Slide 16: Cash Position and Coming Bond Redemptions
Cash Position and Coming Bond Redemptions Maintain ample cash position, well over 2-year worth of bond redemptions Cash position Bond redemption schedule ¥4.4 T *1 (¥ B) Undrawn commitment line*2 704.3 Bond redemptions 3,742.4 for the next 2 years (¥1.9T) ＞ 1,036.2 885.6 1,204.8 528.0 Dec 2023 Jan 2
Slide 17: Cash position: Currency Breakdown and Yield
Cash position: Currency Breakdown and Yield Continuing high yield operations primarily with USD deposits. Securing yields through efficient cash management Yield for Breakdown of cash position*1 SBG USD deposits, etc. 6.0% (¥ T) 5.5% 5.5% 5.2% Yield*2 3.7 5.0% 4.9% 4.5% Subsidiaries 0.2 4.3% US 2Y T
Slide 18: Currency Exchange Impact
Currency Exchange Impact Strong JPY against USD decreases NAV, while increasing consolidated net income FY22 Q4 FY23 Q1 FY23 Q2 FY23 Q3 Forex change since previous quarter end (Forex change in Weaker by Weaker by Weaker by Stronger by USD/JPY) ¥1 (0.6%) ¥11 (8.6%) ¥5 (3.2%) ¥8 (5.2%) Impact on NAV (
Slide 19: Bond Redemption Schedule
Bond Redemption Schedule Bond issuances will be managed with due consideration for cash position and market environment 1,548.0 (¥ B) Domestic senior bonds 296.9 Domestic subordinated bonds Domestic hybrid bonds 1,096.5 Foreign currency-denominated senior notes 222.0 999.0 Foreign currency-denominat
Slide 20: Funding and Fund Management Plans in FY2023
Funding and Fund Management Plans in FY2023 Funding: Mainly for refinance Surplus fund management: Propelling diversification FY2023 is primarily anticipated for refinancing Domestic: Redemption of ~¥400.0B in March 2024 Bond <Reference> Redemptions in FY2024 • Domestic : ¥450.0B (June) • Internatio
Slide 21: SBG Stand-alone Interest-bearing Debt
SBG Stand-alone Interest-bearing Debt*1 Interest-bearing debt (incl. non-recourse) decreased mainly due to decrease in financial liabilities relating to prepaid forward contracts Main changes from September 30, 2023 (¥ B) • Decrease in financial liabilities relating to prepaid forward contracts -¥42
Slide 22: SBG Stand-alone Cash Position
SBG Stand-alone Cash Position Maintain ample cash position 5,171.3 (¥ B) 29.6 4,528.4 41.9 4,397.6 40.6 SB Northstar 3,771.1 28.7 3,173.4 35.6 5,141.6 4,486.5 4,357.0 Main changes from Sep 2023 3,742.4 Increase Decrease 3,137.8 ・Distribution from SVF2, LatAm Funds ・Contribution to SVF2 (-$1.7B)*1 (+
Slide 23: SBG Stand-alone Net Interest-bearing Debt
SBG Stand-alone Net Interest-bearing Debt Adjusted net interest-bearing debt increased but remains at a low level (¥ B) 9,978.8 10,023.3 8,941.6 8,112.2 8,205.2 Finance-related adjustments Asset-backed finance, etc. ¥7,169.9B 7,536.8 8,034.6 Hybrid finance ¥366.9B 5,030.2 6,458.2 7,588.6 Adjusted 3,
Slide 24: 2023 Financial Policy: Prepared For All Market Scenarios
2023 Financial Policy : Prepared For All Market Scenarios Earnings Results for the 9-month period ended December 31, 2022 (Feb 7, 2023) material P15 plotted with S&P 500 index Prospects As of Feb 7, 2023 Scenario 1 Linear early recovery Feb 7 130* Scenario 2 Instability followed by recovery from H2
Slide 25: 2023 Results
2023 Results Controlled LTV at a low level under the financial policy to be prepared for all scenarios. The equity value of holdings increased across all assets, with Arm at its core LTV Track Record*1 Equity Value of Holdings (¥ T) 21.7 16.9 6.9 18.2% 2.0 2.6 11.0% 11.5% 8.3 SVF1+2, LatAm 10.6% 8.0
Slide 26: LTV Track Record
LTV Track Record*1 Secured ample financial reserves through financial management on “defense” in response to the market environment. Moving forward, entering a phase of effectively utilizing leverage for growth-oriented investments Shift towards financial management excelling in both offense and def
Slide 27: Adhering to Financial Policy
Adhering to Financial Policy Maintain LTV below 25% in normal times 1 (upper threshold of 35% even in times of emergency) 2 Maintain at least 2-year worth of bond redemptions in cash Secure recurring distributions and dividend income from 3 SVF and other subsidiaries Finance 24
Slide 28: Our Policy on Supporting Portfolio Companies
Adhering to Financial Policy Our Policy on Supporting Portfolio Companies Portfolio company finances to be No rescue self-financing package Finance 25
Slide 29: FY2023 Financial Strategy
FY2023 Financial Strategy Financial management Adhering to adaptable to financial policy both Defense and Offence Finance 26
Slide 30: Respond to Both Defense and Offence
Respond to Both Defense and Offence Invest in the Defense Information against further downside Revolution, while maintaining financial stability Maintain LTV below 25% in normal times （LTV = 11.5% as of Dec 31, 2023） Maintain at least 2-year worth of bond redemptions in cash （Cash position = ¥4.4T a
Slide 31: Capital Allocation
Capital Allocation New Shareholders investments return* Endeavor to strike a Financial policy balance (Financial stability) * The level of NAV discount is also considered Finance 28
Slide 32: Share Price Movers
Share Price Movers NAV NAV (Net Asset Value) Discount Confidence in NAV Track record of growth growth trajectory (investment strategy) Finance 29
Slide 33: Share Buyback and Share Price (SBG vs. Nikkei 225)
Share Buyback and Share Price (SBG vs. Nikkei 225) 300 200 +72% +67% (Dec 31, 2023) SBG 100 Nikkei 225 ¥0.6T (Feb to May 2019) ¥2.5T (Mar 2020 to May 2021) ¥1.4T (Nov 2021 to Nov 2022) ¥4.5T share buyback in total 0 Jan 2019 Jan 2020 Jan 2021 Jan 2022 Jan 2023 (Note) Indexed with Jan 1, 2019 as 100
Slide 34: NAV and Market Cap
NAV and Market Cap (Dec 31, 2023) NAV growth NAV = most important driver ¥19.2T Market cap ¥9.2T 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 (FY) (Note) As of the end of each quarter For details of NAV, see Appendix “Definition and Calculation Method of SBG’s NAV and LTV (as of
Slide 35: Actions We Need Now
Actions We Need Now Cash position Growth investment NAV is driven by ¥4.4T Reinvestment growth Monetization investments Leveraging debt capacity Financial Shareholders improvement return Q3 LTV remained at low level ¥4.5T returned FY2023 in the past 5 years (Note) Cash position: Cash and cash equiva
Slide 36: Appendix
Appendix
Slide 37: SBG Credit Spread
SBG Credit Spread Spread of SBG foreign currency- SBG 5-year CDS denominated senior notes 700 USD 1.2Y USD 2.7Y 500 SBG 5Y CDS (JPY) bps USD 4.7Y USD 7.7Y bps EUR 0.7Y EUR 3.2Y 450 600 EUR 5.7Y EUR 8.7Y 400 500 350 300 400 250 300 200 200 150 100 100 50 0 0 Dec 2022 Mar 2023 Jun 2023 Sep 2023 Dec 20
Slide 38: Historical Credit Ratings and Financial Condition
Historical Credit Ratings and Financial Condition Acquisition of Acquisition Acquisition Acquisition Listing A+ 14 Japan Telecom of Vodafone KK of Sprint of Arm of SBKK A 13 JCR(A-) A- 12 Outlook Stable BBB+ 11 (since Jan 2023) BBB10 S&P Downgrade BBB-9 （May 2023） S&P (BB) BB+ 8 Outlook Positive BB
Slide 39: Calculation of Equity Value of Holdings as of Dec 31, 2023
Calculation of Equity Value of Holdings as of Dec 31, 2023 $1 = ¥141.83 ¥28.2T （unadjusted） Equity value of holdings Adjustment for (¥ T) Equity value of holdings ー ＝ asset-backed finance (adjusted) （unadjusted） Prepaid Forward Payable Contracts, etc. 923M Share price amount for 4.8 ¥6.9T ＝ ¥8.1T sh
Slide 40: LTV Calculation: SBG Stand-alone Equity Value of Holdings
LTV Calculation: SBG Stand-alone Equity Value of Holdings (L) Adjusted ¥2.49T SBG stand-alone net debt =11.5% (V) Adjusted SBG stand-alone equity value of holdings*1 ¥21.72T (¥ T) Adjusted SBG Major SBG’s interest in Other investments = + + stand-alone equity value of holdings assets SVF1&2 & LatAm
Slide 41: LTV Calculation: Details of Equity Value of Holdings (1/2)
LTV Calculation: Details of SBG Stand-alone Equity Value of Holdings (1/2) (¥ T) Assets Value Calculation method (a)Alibaba 0.01 Multiplying the number of Alibaba ADSs equivalent to the number of shares held by SBG by the Before adjustment 3.84 ADS price Sum of the outstanding maturity settlement am
Slide 42: LTV Calculation: Details of Equity Value of Holdings (2/2)
LTV Calculation: Details of SBG Stand-alone Equity Value of Holdings (2/2) (¥ T) Assets Value Calculation method (g) T-Mobile 1.62 - Value of SBG’s shareholding (92,089,766 shares as of Dec 31, 2023) (incl. the number of shares subject to call options held by Deutsche Telekom (DT): 34,971,809 shares
Slide 43: LTV Calculation: SBG Stand-alone Net Debt
LTV Calculation: SBG Stand-alone Net Debt (L) Adjusted SBG stand-alone net debt*1 ¥2.49T (V) Adjusted SBG stand-alone ¥21.72T =11.5% equity value of holdings (¥ T) Adjusted SBG Consolidated Net debt at self- Other stand-alone net debt = net debt - financing entities - adjustments 2.49 14.76 4.74 7.5
Slide 44: LTV Calculation: Details of SBG Stand-alone Net Debt
LTV Calculation: Details of SBG Stand-alone Net Debt (¥ T) SBG stand-alone net debt Consolidated net interest-bearing debt - net interest-bearing debt (before adjustment) 10.02 at self-financing entities*1 For hybrid bonds and hybrid loans with maturity dates, deduct 50% from interest-bearing debt;
Slide 45: Adjustment for Asset-backed Finance in LTV and NAV Calculation
Adjustment for Asset-backed Finance in LTV and NAV Calculation Non-recourse asset-backed finance is deducted from debt. Value of assets required for settlement is deducted from assets. (¥ T) Forward/Collar/Put 1 transactions 2 Margin loan 28.2 Main shares Alibaba SBKK, Arm used 1 4.8 Asset-backed fi
Slide 46: Forward Transaction / Collar Transaction
Forward Transaction / Collar Transaction Objective Non-recourse financing using derivatives • Transaction where parties agree to settle at a pre-specified price or price range at a specific date in the future • Finance through pledged shares and derivatives referencing them Outline • Settlement at m
Slide 47: Beneficial Ownership of Alibaba Shares
Beneficial Ownership of Alibaba Shares Fully monetized Alibaba shares through prepaid forward contracts Beneficial 13.5% 13.7% 13.8% 13.9% 13.8% ownership Used for prepaid forward contracts Dec 2022 *1 Mar 2023 *2 Jun 2023 *3 Sep 2023 *4 Dec 2023 *5 *1 Calculated based on the number of ordinary shar
Slide 48: Geographical Portfolio Diversification
Geographical Portfolio Diversification Proportion of China decreased significantly Proportion of EMEA increased significantly due to growth of Arm’s value Net of asset-backed finance 8% China 15% 31% 15% Japan 18% APAC 9% (excluding China and Japan） 11% 12% 9% EMEA 43% 27% 20% 4% 5% 4% Latin America
Slide 49: Debt Fixed/Floating Ratio of Interest-bearing Debt
Debt Fixed/Floating Ratio of Interest-bearing Debt No risk of surge in interest payments from short-term interest rate rise Fixed/Floating Ratio of SBG Stand-alone Interest-bearing Debt*1 Floating rate; USD Floating rate; JPY*4 14% 10% 1 ppt rise in USD interest rate ¥8.2B interest payment results i
Slide 50: Breakdown by Currency
Breakdown by Currency Investment and monetization flows are mainly in dollars, while debt refinancing is principally in the same currency Investments and monetization Debt composition Cash position: ¥3.7T*1 Equity value of holdings: ¥21.7T*2 Debt*3: ¥6.5T Subsidiaries EUR Net of asset- JPY backed fi
Slide 51: Consolidated Interest-bearing Debt/ Cash Position/ Net Interest-bearing Debt
Consolidated Interest-bearing Debt/ Cash Position/ Net Interest-bearing Debt Consolidated Interest-bearing Debt*1 (¥ B) Dec 2022 Mar 2023 Jun 2023 Sep 2023 Dec 2023 SBG stand-alone 11,250.0 12,691.7 14,083.3 14,335.8 13,765.7 Incl. SB Northstar - - - - - SVF1&2 and LatAm Funds 1,319.9 1,322.7 1,419.