Softbank Group Corp. · TSE:9984

Softbank — Q1 FY2017 Earnings Presentation

70 slides from Softbank's earnings presentation, Aug 7, 2017

  1. Slide 1: Earnings Results for the 3-month Period ended June 30, 2017

    Earnings Results for the 3-month Period ended June 30, 2017 August 7, 2017

  2. Slide 2: Important Notice to Recipients

    Important No+ce to Recipients Neither So*Bank nor any of its applicable affiliates makes any representa8ons or warran8es, express or implied, as to the accuracy or completeness of the informa8on in this presenta8on (this “Presenta+on”), other than the historical financial performance set forth herein.

  3. Slide 3: Disclaimer

    Disclaimer This material was prepared based on information available and views held at the time it was made. Statements in this material that are not historical facts, including, without limitation, plans, forecasts and strategies are “forward-looking statements”. Forward-looking statements are by t

  4. Slide 4: Consolidated Results

    — Consolidated a softBank Results ———EE

  5. Slide 5: Consolidated Results

    Consolidated Results FY2016 FY2017 (JPY bn) Change YoY Q1 Q1 Net sales 2,126.5 2,186.1 +59.6 +3% Adjusted 678.4 700.1 +21.7 +3% EBITDA EBIT 319.2 479.3 +160.1 +50% Net income 254.2 5.5 -248.7 -98% excl. gain on sales of Alibaba shares (FY16Q1), and derivative loss (FY17Q1) 113.9 183.3 69.4 +61% Net

  6. Slide 6: Net Sales

    Net Sales (JPY bn) 2,126.5 2,186.1 47.0 Arm 873.9 910.4 Sprint Increase in equipment revenue Up 3% 286.6 261.5 Distribution & other 204.2 211.5 Yahoo Japan Domestic Telco 761.8 755.7 Decrease in telecom service revenue and product & other sales FY2016 FY2017 Q1 Q1 * Distribution & other = distributi

  7. Slide 7: Adjusted EBITDA

    Adjusted EBITDA 700.1 678.4 (JPY bn) Up 3% 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 '17 (FY) Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Japanese-GAAP IFRSs * FY2013-14: excluding impact of GungHo & Supercell 5

  8. Slide 8: Adjusted EBITDA

    Adjusted EBITDA (JPY bn) 700.1 Arm 678.4 Up 3% 7.9 Sprint 271.7 321.9 Cost reduction effort 59.5 56.6 Yahoo Japan 351.3 329.5 Domestic Telco Upfront investment (Home Bundle Discount, customer rewards, etc.) FY2016 FY2017 Distribution & other Q1 Q1 * Distribution & other = distribution + SVF + other

  9. Slide 9: EBIT

    EBIT 479.3 (JPY bn) 319.2 Up 50% 2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 '17 (FY) Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Japanese-GAAP IFRSs * FY2013-14: excluding impact of GungHo & Supercell 7

  10. Slide 10: EBIT

    EBIT 479.3 SVF (JPY bn) 105.2 Up 50% Valuation gain in NVIDIA Sprint 319.2 Cost reduction effort 132.0 45.4 Gains from spectrum 50.3 license exchange (excl. SVF: Up 17%) 51.6 Yahoo Japan Domestic Telco 239.0 218.5 Upfront investment (Home Bundle Discount, customer rewards, etc.) Distribution, Arm &

  11. Slide 11: Net income

    Net income (JPY bn) 254.2 Down 98% 5.5 FY2016 FY2017 Net income: Q1 Q1 net income attributable to owners of the parent 9

  12. Slide 12: Net income excl. gain on sales of Alibaba shares and derivative loss

    excl. gain on sales of Alibaba shares, Net income and derivative loss (JPY bn) Up 61% Gain on Sales of 140.3 183.3 Alibaba Shares 113.9 -177.8 Derivative Loss (in relation to monetization of Alibaba shares) 5.5 (Note) Gain on sales of Alibaba shares and derivative loss recorded after considering tax

  13. Slide 13: Derivative Gain and Loss Relating to Variable Prepaid Forward Contract for Alibaba Shares

    Derivative Gain and Loss Relating to Variable Prepaid Forward Contract for Alibaba Shares At signing of contract Valuation gain (loss) on derivatives over 3 years 3 years total FY16 FY16 FY16 FY16 FY17 Reversal of June 1, 2016 derivative loss as Q1 Q2 Q3 Q4 Q1 of FY17Q1 Share price (USD) 105.79 140.

  14. Slide 14: Financial Status

    Financial Status Domestic Telco Other (incl. Sprint acquisition cost) etc. Net interest- Net interest- JPY bearing debt JPY 3.5t bearing debt 4.4t Adjusted JPY 1.2t 2.9x Equity value of JPY 21% EBITDA holdings 20.4t *Net interest-bearing debt as of June 30, 2017, adjusted EBITDA FY17Q1 LTM Holding v

  15. Slide 15: Issue of USD-denominated Undated Hybrid Notes

    Issue of USD-denominated Undated Hybrid Notes (USD 4.5bn) 1. 50% equity treatment from rating agencies 2. Recorded as equity 3. Enhance finance stability 13

  16. Slide 16: Domestic Telco

    ea OOftBank Domestic Telco

  17. Slide 17: Domestic Telco EBIT

    Domestic Telco EBIT Domestic Telco 239.0 (JPY bn) 218.5 Down 9% Due to upfront investment * FY2011: JGAAP, FY2012-17: IFRSs After FY2014: Domestic Telecommunications segment Up to FY2013: Mobile Communications segment + Fixed-line ’12 ’13 ’14 ’15 ’16 '17 (FY) telecommunications segment Q1 Q1 Q1 Q1 Q

  18. Slide 18: Domestic Telco Free Cash Flow

    Domestic Telco Free Cash Flow Domestic Telco (JPY bn) 76.5 69.7 Up 10% -32.2 2015 2016 2017 (FY) * Free Cash Flow = operating cash flow + investing cash flow Q1 Q1 Q1 * IFRSs; excluding intercompany transactions with SoftBank Group Corp. 16

  19. Slide 19: Domestic Telco Growth Strategy: Expansion of New Areas

    Domestic Telco Growth Strategy WeWork Digital Marketing Energy FinTech IoT Cloud Security EC Synergy with Yahoo Japan Robotics Self-driving AI Cars Expansion of New Areas Expansion of smartphone and FTTH services 17

  20. Slide 20: Upfront Investment

    Upfront Investment Domestic Telco Yahoo! JAPAN Brand Guideline サービスロゴデータ Expansion of Synergy with Customer rewards ●1行ロゴ プロモーション利用の場合は原則このロゴを使用してください。 customer base Yahoo Japan ショッピング Yahoo! Shopping ショッピング 10x loyalty points everyday ＜赤＞ ＜グレー＞ PANTONE 185 PANTONE Cool Gray 11 DIC 156 DIC 541 M91%+

  21. Slide 21: Net Additions (smartphone)

    Net EBITAdditions (smartphone) Domestic Telco (k) 450 Up 61% 280 160 ’15 ’16 '17 (FY) Q1 Q1 Q1 *Net Additions = net additions of cumulative smartphone subscribers (including upgrades) 19

  22. Slide 22: Cumulative Subs (FTTH Service)

    Cumulative Subs (FTTH Service) Domestic Telco 4.01m Up 79% 2.24m ’15 ’16 '17 (FY) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 *SoftBank Hikari includes the data of SoftBank Air 20

  23. Slide 23: Churn Rate (mobile)

    Churn Rate (mobile) Domestic Telco au 0.91% 0.79% SoftBank 0.67% NTT DOCOMO Significantly improved (Source) Created by SoftBank Group Corp. based on respective companies’ publicly available information ’15 '16 '17 NTT DOCOMO: churn rate au: churn rate in personal services segment Q1 Q1 Q1 SoftBank:

  24. Slide 24: Yahoo! Shopping # of Buyers

    Yahoo! Shopping # of Buyers * Total of “SoftBank” and “Y!mobile” users * Via smart login Domestic Telco 10x loyalty points campaign, etc. Doubled in 5 months Achieved 1m buyers Jan. Feb. Mar. Apr. May June 2017 22

  25. Slide 25: Expansion of New Areas

    Expansion of New Areas Domestic Telco Advanced technologies and business models SoftBank Group Investees Business expansion and evolution 23

  26. Slide 26: Generate synergies with investees

    Generate synergies with investees 24

  27. Slide 27: WeWork Japan

    WeWork Japan Transform work style in Japan *A subsidiary of SoftBank Group Corp. and SoftBank Corp. will contribute to the joint venture. 25

  28. Slide 28: FY2017 Forecast

    FY2017 Forecast Domestic Telco Prioritize upfront investment 1 Drive growth strategy 2 Maintain FCF over JPY 500bn Expect Domestic Telco income to decline (up to -7% YoY) * 3 Focus on future growth *Operating income of Domestic Telecommunications segment (FY2017) 26

  29. Slide 29: Sprint

    Sprint »

  30. Slide 30: Net Operating Revenue

    Net Operating Revenue USGAAP (USD bn) 8.0 8.2 Up 2% 2014 ’15 ’16 ’17 Q1 Q1 Q1 Q1 (FY) 28

  31. Slide 31: Cost Reduction

    Cost Reduction USGAAP (USD bn) 4.0 3.6 Nearly$370m SG&A reduction Cost of service 2016 2017 (FY) Q1 Q1 29

  32. Slide 32: Adjusted EBITDA

    Adjusted EBITDA USGAAP (USD bn) 2.9 Joined SoftBank Group Doubled in 1.4 4 years 2013 ’14 ’15 ’16 ’17 (FY) Q1 Q1 Q1 Q1 Q1 30

  33. Slide 33: Operating Income

    Operating Income USGAAP (USD bn) 1.2 Joined 3x SoftBank Group 0.4 2013 ’14 ’15 ’16 ’17 (FY) Q1 Q1 Q1 Q1 Q1 31

  34. Slide 34: Net Income

    Net Income USGAAP (USD bn) 0.2 Positive for first time in 3 years -0.3 2014 ’15 ’16 ’17 (FY) Q1 Q1 Q1 Q1 32

  35. Slide 35: RootScore Awards (Metropolitan Areas)

    RootScore Awards (Metropolitan Areas) 211 166 Up 27% RootScore Awards Number of outright or shared first-place for 6 indexes of network performance measured in metro markets (125 markets) (Ref.) 6 indexes: overall, reliability, speed, data, call, and text 2016 2017 (CY) H1 H1 Source: RootMetrics 33

  36. Slide 36: National Average Download Speed Change

    National Average Download Speed Change (Jan. 1, 2017 to June 30, 2017) Sprint 20% T-Mobile 9% AT&T -8% Most Verizon -10% improved *Sprint’s analysis of Ookla's Speedtest Intelligence data from January 2017 to June 2017 for all mobile results 34

  37. Slide 37: FY2017 Forecast

    FY2017 Forecast 1 Adjusted EBITDA $10.8-11.2bn 2 Operating income $2.1-2.5bn 3 Cash CAPEX $3.5-4bn *Cash CAPEX excluding CAPEX associated with purchasing leased devices from indirect channels 35

  38. Slide 38: Signs of further growth

    Signs of further growth Sprint

  39. Slide 39: Yahoo Japan

    YAHOO! JAPAN

  40. Slide 40: Advertising Revenue

    Advertising Revenue (JPY bn) 70.4 65.3 33.1 35.7 Display ads Up 8 34.7 Search ads 32.2 (FY) 2013 ’14 ’15 ’16 ’17 (FY) Q1 Q1 Q1 Q1 Q1 38

  41. Slide 41: Yahoo! Shopping # of Items

    Yahoo! Shopping # of Items ショッピング 290m ＜赤＞ PANTONE 185 DIC 156 M91%+Y76% R255・G0・B51 ＜グレー＞ PANTONE Cool Gray 11 DIC 541 BL80% #545454 Gray ●2行ロゴ リンク用ロゴなどスペースが狭い場合に使用できます。 Biggest selection ショッピング ショッピング ●その他色指定 白抜き利用の場合（背景色は任意） ※紫ロゴは原則使用しないでください in Japan ＜紫＞ ショッピング PANTONE 259 DIC 227 C65%+M100%+K15

  42. Slide 42: Shopping Transaction Value

    Shopping Transaction Value ショッピング (JPY bn) 139.8 ＜赤＞ PANTONE 185 DIC 156 M91%+Y76% R255・G0・B51 ＜グレー＞ PANTONE Cool Gray 11 DIC 541 BL80% #545454 Gray ●2行ロゴ リンク用ロゴなどスペースが狭い場合に使用できます。 Up 40 ショッピング ショッピング 99.9 ●その他色指定 白抜き利用の場合（背景色は任意） ※紫ロゴは原則使用しないでください ＜紫＞ ショッピング PANTONE 259 DIC 227 C65%+M100%+K15% R123

  43. Slide 43: Arm

    arm

  44. Slide 44: Revenue

    Revenue (JPY bn) 47.8 Up 2% 46.7 ($0.42bn) ($0.43bn) FY2016 FY2017 (Apr. 2016 - June 2016) (Apr. 2017 - June 2017) *USD 1 = JPY 111.61 (average exchange rate of April 2017 - June 2017) 42

  45. Slide 45: Arm-based Chips Shipped

    Arm-based Chips Shipped 4.7bn 3.6bn Up 28% 1990 ’93 ’96 ’99 ’02 ’05 ’08 ’11 ’14 '17 (FY) Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 43

  46. Slide 46: Technical Headcount

    Technical Headcount 4,269 Accelerate investment 3,409 Up 25% 2016 2017 June 30 June 30 *Number of technical employees 44

  47. Slide 47: Announced new processors

    Announced new processors >50% 2.5x more performance higher power efficiency Targeting premium smartphones for 2018 45

  48. Slide 48: New AI experiences everywhere

    Cortex-A75 Cortex-A55 Mobile Safe IoT edge Everyday Autonomous Infrastructure large screen automotive gateway devices systems New AI experiences everywhere 46

  49. Slide 49: New GPU Mali-G72

    New GPU “Mali-G72” Higher energy Better area AI acceleration efficiency efficiency 25% 17% 20% Accelerating AI and VR in mobile devices 47

  50. Slide 50: New image processor Mali-C71

    New image processor “Mali-C71” (for automotive market) Current ISP * Supporting safe and comfortable driving Mali- C71 *ISP: image signal processor 48

  51. Slide 51: Alibaba Smart Speaker (Tmall Genie)

    Alibaba Smart Speaker (Tmall Genie) Powered by Cortex-A35 49

  52. Slide 52: Arm-based IoT products

    Smart watch Global Locator Mavic Pro (Drone) Arm-based IoT products Glass device for visually impaired Smart lighting people 50

  53. Slide 53: Accelerating the next trillion IoT devices

    DesignStart for Cortex-M0 and Cortex-M3 Faster access to IoT processors No upfront fee Accelerating the next trillion IoT devices *DesignStart gives companies easy access to Arm IP. There is no upfront license fee, the partner pays royalties once chips enter production. 51

  54. Slide 54: FY2017 Forecast

    FY2017 Forecast 1 Create new IoT opportunities 2 Gain more share in long-term growth markets 3 Accelerate investment in new technology 52

  55. Slide 55: Forming strategic synergy group for Information Revolution

    Forming strategic synergy group for Information Revolution 53

  56. Slide 56: Expanding group of innovative entrepreneurs

    Expanding group of innovative entrepreneurs (Note) The investment in DiDi is not from SoftBank Vision Fund. 54

  57. Slide 57: Overwhelming market position in GPU for AI

    Source: NVIDIA Revenue (Data Center) Revenue (Automotive) $830mil +145% +52% $487mil $320mil $339mil FY2016 FY2017 FY2016 FY2017 Overwhelming market position in GPU for AI 55

  58. Slide 58: The world's leading mobile transportation platform

    Registered Registered Daily Available in Users Drivers Completed Rides 330m 26m 400+ >21m cities The world’s leading mobile transportation platform (Note) The investment in DiDi is not from SoftBank Vision Fund. As of July 2017 56

  59. Slide 59: Overwhelming No.1

    Taxi (China) Private Car (China) >99% >95% Overwhelming No.1 (Note) The investment in DiDi is not from SoftBank Vision Fund. As of July 2017 57

  60. Slide 60: >10x better performance than other tests

    Machine Learning Detection 13x 25x 13x 10x Other tests Guardant Other tests Guardant Other tests Guardant Other tests Guardant Single-Nucleotide Insertions / Copy Number Fusions Variants Deletions Variants >10x better performance than other tests 58

  61. Slide 61: Overwhelming share in industrial IoT

    100% 90% 90% 95% All Electricity Pharma Oil & Gas Metals & Mining (United States) (Fortune Top 10) (Fortune Top 40) (Fortune Top 10) Overwhelming share in industrial IoT 59

  62. Slide 62: 37% reduction in collision incidents

    Smart fleet service with artificial intelligence Camera Device Monitor (outside) Monitor (inside) 37% reduction in collision incidents 60

  63. Slide 63: Innovative indoor farm leveraging IoT and AI

    Productivity (per same area) Transportation cost Up to 350x As low as 1/10 Traditional farm Plenty Traditional farm Plenty Innovative indoor farm leveraging IoT and AI 61

  64. Slide 64: Number of entities, more than 10,000x

    IMPROBABLE Traditional game Number of entities, more than 10,000x * Traditional client-server game 62

  65. Slide 65: Realized self-driving commercial floor cleaners

    Cleaning Cost Realized self-driving 50% commercial reduction floor cleaners Manual Robot (Deep Learning) 63

  66. Slide 66: —_c_m: pew «6U6feehl;l)lUe ee) in

    —_c_m: pew «6U6feehl;l)lUe ee) in

  67. Slide 67: Forming strategic synergy group for Information Revolution

    Forming strategic synergy group for Information Revolution 65

  68. Slide 68: Signs of further growth

    Signs of further growth Sprint

  69. Slide 69: SoftBank

    SoftBank

  70. Slide 70: Adoption of IFRSs, Definition of terms, Trademarks

    1. Adoption of IFRSs SoftBank Group Corp. adopted the International Financial Reporting Standards (IFRSs) from fiscal 2013. Figures for fiscal 2012 have also been presented in accordance with IFRSs. 2. Definition of terms etc. in this material. Free cash flow = cash flows from operating activities +

SoftBank Group — Q1 FY2017 Earnings Presentation on 6ix