Monex Group, Inc. · TSE:8698
Monex — Q2 FY2020 Earnings Presentation
52 slides from Monex's earnings presentation, Oct 28, 2019
Slide 1: Financial Results for 2Q of Fiscal Year Ending March 31, 2020
October 28, 2019 TSE 1st Section: 8698 Financial Results for 2Q of Fiscal Year Ending March 31, 2020
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.9 II. Consolidated Performance p.10 - p.28 III. Business Update p.29 - p.40 Appendix: Group Overview p.41 - p.51 This is an English translation of Japanese presentation materials prepared in connection with t
Slide 4: I. Highlights
I. Highlights II. Consolidated Performance III. Business Update Appendix. Group Overview 3
Slide 5: Business Overview 1/2
Business Overview 1/2 As US online brokerages moved to the stage of zero-commissions, Japan and US segments further strengthen the offering of asset-based services - Discount Competition Stage - - Zero Commission Stage - Primary Service Transaction Service Asset-based Service Low-cost transaction fe
Slide 6: Business Overview 2/2
Business Overview 2/2 TradeStation launched “TSgo”, a new offering with free stock, ETF and options trading on web and mobile, in response to the industry’s recent adoption of zero commission trading. To manage through the lower interest US rate environment, diversification of profits will be sought
Slide 7: Highlights 2Q of FYE Mar. 2020 (3 months) 1/4
Highlights 2Q of FYE Mar. 2020 (3 months) 1/4 US keeps the highest profitability among the five segments while Crypto Asset decreased SG&A as planned Segment profit* remained to be about ¥0.4B securing surplus. Japan Monex Securities will further strengthen the asset-based services With an expansion
Slide 8: Highlights 2Q of FYE Mar. 2020 (3 months) 2/4
Highlights 2Q of FYE Mar. 2020 (3 months) 2/4 ◆Total operating revenue after deducting financial expenses and profit attributable to owners of the Company (JPY million) Total operating revenue after deducting financial expenses Quarterly profit attributable to owners of the Company Pre-tax Profit 1,
Slide 9: Highlights 2Q of FYE Mar. 2020 (3 months) 3/4
Highlights 2Q of FYE Mar. 2020 (3 months) 3/4 ◆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 US 6,000 5,115 4,985 4,996 4,
Slide 10: Highlights 2Q of FYE Mar. 2020 (3 months) 4/4
Highlights 2Q of FYE Mar. 2020 (3 months) 4/4 ◆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 Crypto Asset Quarterly profit before income taxes 1,274 1,500 1,00
Slide 11: II. Consolidated Performance
I. Highlights II. Consolidated Performance III. Business Update Appendix. Group Overview 10
Slide 12: YoY Comparison (6 months) Consolidated Performance
YoY Comparison (6 months) Consolidated Performance FYE Mar. 2019 FYE Mar. 2020 2Q 2Q Rate of (JPY million) Variance Reference (Apr. 2018– (Apr. 2019– change Sep. 2018) Sep. 2019) P13: Analysis of Japan segment Total operating revenue after 23,845 23,277 -567 -2% P15: Analysis of US segment (USD) ded
Slide 13: YoY Comparison (6 months) Segment Performance
YoY Comparison (6 months) Segment Performance Japan US Asia Pacific Crypto Asset Investment (JPY million) 2019/3 2020/3 2019/3 2020/3 2019/3 2020/3 2019/3 2020/3 2019/3 2020/3 2Q 2Q 2Q 2Q 2Q 2Q 2Q 2Q 2Q 2Q Total operating revenue after deducting financial expenses 13,111 11,227 9,238 9,921 413 292 1
Slide 14: YoY Comparison (6 months) Analysis: Operating Revenue (Japan)
YoY Comparison (6 months) Analysis: Operating Revenue Japan : Decreased market trading volume by individual traders led to lower brokerage commissions and net financial income. Tightened spread of FX services drove a rise in market share of trading volume to the highest level ■ Total operating reven
Slide 15: YoY Comparison (6 months) Analysis: SG&A (Japan)
YoY Comparison (6 months) Analysis: SG&A Japan : System related expenses largely decreased due to lower depreciation cost reflecting the impairment in the previous fiscal year ■ SG&A SG&A Total -9.6% (-1,111) (JPY million) 15,000 ■Others (-52) 11,553 ■Advertising expenses (-153) ■Communication, frei
Slide 16: YoY Comparison (6 months) Analysis: Operating Revenue (USD)
YoY Comparison (6 months) Analysis: Operating Revenue (USD) US : Higher interest rates and growing customers’ assets drove larger net financial income. Additionally, the interest rate swap backed by customers’ assets in custody expired in Nov 2018 ■ Total operating revenue after deducting financial
Slide 17: YoY Comparison (6 months) Analysis: SG&A (USD)
YoY Comparison (6 months) Analysis: SG&A (USD) US : Discretionary spending remains efficiently controlled while variable costs increased in proportion to the increase in revenue ■ SG&A SG&A Total +2.1% (+1,651) (USD thousand) 100,000 79,937 ■Others (-575) * ■Advertising expenses （-997） 90,000 78,287
Slide 18: YoY Comparison (6 months) Analysis: Operating Revenue (Crypto)
YoY Comparison (6 months) Analysis: Operating Revenue Crypto : Coincheck sequentially resumed its services since October 2018. Trading income largely increased Total operating revenue after deducting ■ Total operating revenue after deducting financial expenses and cost of sales financial expenses an
Slide 19: YoY Comparison (6 months) Analysis: SG&A (Crypto)
YoY Comparison (6 months) Analysis: SG&A Crypto : SG&A declined due to lower fixed costs ■ SG&A SG&A Total -13.9% (-312) (JPY million) 2,500 2,244 ■Others (-409) * ■Advertising expenses (+112) 1,932 2,000 623 ■Communication, freight and information 215 expenses (+34) 1,500 17 143 129 177 ■Commission
Slide 20: QoQ Comparison (3 months) Consolidated Performance
QoQ Comparison (3 months) Consolidated Performance 1Q FYE Mar. 2Q FYE Mar. 2020 2020 Rate of （JPY million） Variance change Reference (Apr. 2019- (Jul. 2019- Jun. 2019) Sep. 2019) P21: Analysis of Japan segment Total operating revenue after 11,881 11,397 -484 -4% P23: Analysis of US segment (USD) ded
Slide 21: QoQ Comparison (3 months) Segment Performance
QoQ Comparison (3 months) Segment Performance Japan US Asia Pacific Crypto Asset Investment (JPY million) 2020/3 2020/3 2020/3 2020/3 2020/3 2020/3 2020/3 2020/3 2020/3 2020/3 1Q 2Q 1Q 2Q 1Q 2Q 1Q 2Q 1Q 2Q Total operating revenue after deducting financial expenses and 5,598 5,629 4,996 4,925 195 96
Slide 22: QoQ Comparison (3 months) Analysis: Operating Revenue (Japan)
QoQ Comparison (3 months) Analysis: Operating Revenue Japan : Tightened spread of FX services contributed to keep the market share of trading volume at the highest level ■Quarterly total operating revenue after deducting financial Quarterly total operating revenue after expenses and cost of sales de
Slide 23: QoQ Comparison (3 months) Analysis: SG&A (Japan)
QoQ Comparison (3 months) Analysis: SG&A Japan : The impairment in the previous fiscal year contributed to lower SG&A Quarterly SG&A +1.0％ (+53) ■Quarterly SG&A *Figures in parenthesis is the variance from previous quarter (JPY million) (JPY million) 7,000 ■ Others (-118) 5,718 5,762 5,698 ■ Adverti
Slide 24: QoQ Comparison (3 months) Analysis: Operating Revenue (USD)
QoQ Comparison (3 months) Analysis: Operating Revenue (USD) US : Revenue remains solid due to an increase in brokerage commissions driven by higher volatility ■Quarterly total operating revenue after deducting financial expenses and cost of sales (USD thousand) Quarterly total operating revenue afte
Slide 25: QoQ Comparison (3 months) Analysis: SG&A (USD)
QoQ Comparison (3 months) Analysis: SG&A (USD) US : Amortization and depreciation cost slightly increased due to system investments for new business developments. Total SG&A is well under control ■Quarterly SG&A Quarterly SG&A +0.9% (+360) (USD thousand) *Figures in parenthesis is the variance from
Slide 26: QoQ Comparison (3 months) Analysis: Operating Revenue (Crypto)
QoQ Comparison (3 months) Analysis: Operating Revenue Crypto : Transaction volume and revenue declined as the uptrend of cryptocurrency market has been in a break ■Quarterly total operating revenue after deducting financial Quarterly total operating revenue after expenses and cost of sales deducting
Slide 27: QoQ Comparison (3 months) Analysis: SG&A (Crypto)
QoQ Comparison (3 months) Analysis: SG&A Crypto : Coincheck executed a significant fixed cost reduction Quarterly SG&A -28.5％ (-321) ■Quarterly SG&A *Figures in parenthesis is the variance from previous quarter (JPY million) (JPY million) 1,373 ■ Others (-87) ■ Advertising expenses (+45) 1,500 1,200
Slide 28: 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 Sep 30, 2019 Assets Liabilities (*1) Non-current assets JPY 1,
Slide 29: 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% 12.9% 800% 10,000 7
Slide 30: III. Business Update
I. Highlights II. Consolidated Performance III. Business Update Appendix. Group Overview 29
Slide 31: Business Update US segment 1/2
Business Update US segment 1/2 Account growth was at the record high. “TSgo” will accelerate the growth further - New branding and simplified offerings continue to successfully attract casual traders/millennials to expand customer base - Free trade campaign was a key driver to record highest number
Slide 32: Business Update US segment 2/2
Business Update US segment 2/2 Diversify the revenue stream with the development of new businesses while growing existing profits through expansion of customer base - Commission received plus net financial income increased by 1% on QoQ. Commission received increased by approximately 1% under higher
Slide 33: Business Update Japan segment 1/3
Business Update Japan segment 1/3 Aiming to expand customer base and to create a new asset-based revenue stream Wealth Creation Service Intermediary Service Monex Stock Scouter API Cooperation - Implemented several feature updates - Utilizing APIs, generated from in-house system, including optimizat
Slide 34: Business Update Japan segment 2/3
Business Update Japan segment 2/3 Favorable growth in US equity trading and FX market share US Equity Trading FX Trading - The minimum transaction fee for US equities - Market share of traded currency in FX trading was abolished from the beginning of July reached to 1.7%, twice as large as 2Q FYE 20
Slide 35: Business Update Japan segment 3/3
Business Update Japan segment 3/3 Promote initiatives for activation of Japanese stock market Acquisition of Active Traders Activism Initiatives Margin Trading Services Monex Activist Forum (since Jan 2019) - Expanded the list of stocks for short trading - Aims to facilitate communication between se
Slide 36: Business Update Crypto Asset Segment 1/3
Business Update Crypto Asset Segment 1/3 Successfully reduced fixed cost and lowered its break-even point. Promote new initiatives including customer expansion and adding new cryptocurrencies Revenue Stream and Competitiveness - Operates BTC exchange/market place and the market place of 9 altcoins i
Slide 37: Business Update Crypto Asset Segment 2/3
Business Update Crypto Asset Segment 2/3 Number of registered users increased by alliances with group companies Registered and ID-confirmed Users User Acquisitions Number of app downloads Monex Group Shareholders’ Benefits Grant ¥500 worth of Bitcoin to Monex Group 2.62M Users with shareholders who
Slide 38: Business Update Crypto Asset Segment 3/3
Business Update Crypto Asset Segment 3/3 Monex Crypto Bank launched a new database service “LOOKBLOCK” Offers holistic database services, delivering information on companies and products involved in cryptoassets and blockchain, aiming to expand its institutional users and planning to shift from free
Slide 39: Business Update Asia Pacific Segment
Business Update Asia Pacific Segment Hong Kong residents account for only 25% of Monex Boom Securities customers. The revenue impact from the political instability is limited Monex Boom Securities (HK) Hong Kong 25% - Temporary loss from a bad debt for margin loan lending ¥0.11B caused the first def
Slide 40: Business Update Investment Segment
Business Update Investment Segment MV1 attracts promising investment opportunities by leveraging its unique network Details of MV1 Fund R&D purpose investment* Features Active support for startups in product development and growth stages IoT Blockchain Cryptocurrency Investment 2.5 billion yen (Foun
Slide 41: Business Update ESG Management
Business Update ESG Management Contribute to the sound development of the capital market and promote initiatives that lead to sustainable growth of Monex Group Materiality Matrix ESG Initiatives Awarded Gold Rating for PRIDE index Disclosing Materiality Matrix - Monex Group and Monex Securities each
Slide 42: Appendix. Group Overview
I. Highlights II. Consolidated Performance III. Business Update Appendix. Group Overview 41
Slide 43: Corporate Value
Corporate Value Enhance corporate value driven by the steady growth of online brokerage businesses and the mid-to-long term growth drivers Steady development of online Three mid-to-long term Enhanced brokerage business growth drivers Corporate Value Finance in a New Age 2019/9 EBITDA* ¥ 3.2 B Crypto
Slide 44: Group Overview
Group Overview Japan: 1.83M accounts, Crypto Asset: 1.93M users, US: 117K accounts, AP: 13K accounts. Established 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 (JPY 100
Slide 45: Group Overview－Revenues, Costs, and Employees
Group Overview－Revenues, Costs, and Employees ◆Total operating revenue after deducting financial expenses ◆SG&A by segment and by cost items by region and by business Others 3% Compensation and benefits 4% Crypto System related expenses 3% Othres 2% 2. System Asset 1. Equities Others 2% Crypto Finan
Slide 46: Group Overview－Corporate value creation process
Group Overview－Corporate value creation process Democratization of capital markets is our core value and the key driver for the Company’s sustainable growth 45
Slide 47: New financial conglomerate in a new age
Group strategy overview combined with crypto-asset business New financial conglomerate in a new age Traditional Financial New Financial Monex Group Conglomerate Conglomerate Bank Crypto Asset Bank Coincheck Monex Securities, TradeStation Securities Broker Global Online Brokerage Securities, Monex Bo
Slide 48: Corporate Governance
Corporate Governance Established 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 i
Slide 49: Monex Group
Monex Group (As of Sep. 30, 2019) 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, Inc. (Florida, U.S.) One of the major online brokerage firms in Japan Online securities group with award-winning trading technology - President : Yuko Seimei development capabilities - Founded in
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 ■ Shareholders distribution ■ Shareholders & indicators per share ◆ Our basic policy for shareholders distribution ◆ Major shareholders and shareholder breakdown (as of Sep. 30, 2019) Monex Group, Inc. Monex Group aims to provide returns to its shareholders 3.9% MOMO&Co. and Oki Mat