Softbank Group Corp. · TSE:9984
Softbank — Q2 FY2020 Earnings Presentation
66 slides from Softbank's earnings presentation, Nov 11, 2020
Slide 1: Earnings Results for the Six-month Period Ended September 30, 2020
Earnings Results for the Six-month Period Ended September 30, 2020 Investor Briefing November 11, 2020 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 used for translation FY2019 FY2020 Average during quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 USD 110.00 107.70 108.98 109.22 107.74 105.88 1 CNY 16.13 15.37 15.46 15.56 15.16 15.27 EOQ Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 1 USD 108.83 105.80 1 CNY 15.31 15.54 Abbreviations A
Slide 4: Finance
Finance SBG standalone financial numbers are calculated by excluding numbers of self-financing entities from the consolidated numbers, unless otherwise stated. Major self-financing entities are SBKK, Arm, SVF1, SVF2, Brightstar, PayPay, Fortress, SB Energy, etc.
Slide 5: Summary of FY2020 Q2
Summary of FY2020 Q2*1 Completed the asset monetization under the ¥4.5T Program. Diversifying assets holdings while being firmly committed to our financial policies. Completed the asset monetization under the ¥4.5T Program Asset - Asset monetization completed in September 2020. monetization - SBKK
Slide 6: Progress of ¥4.5T Program
- Progress of ¥4.5T Program - Status of Assets - Financial Condition - Financial Strategy - ESG Initiatives Finance 3
Slide 7: SBG Share Price and Credit Spread
SBG Share Price and Credit Spread Both equity and credit markets favorably perceived the progress of ¥4.5T Program. SBG share price*1 As of Nov 6 bps SBG CDS*2 (YTD) (YTD) 150 600 141 (SBG) 544bps 133 (Nasdaq) 125 400 100 99 (Dow) As of Nov 6 96 (TOPIX) 256bps 200 75 ¥4.5T Program announced ¥4.5T Pr
Slide 8: ¥4.5T Program
¥4.5T Program Large-scale returns to shareholders and creditors by asset monetization Asset sale and monetization up to ¥4.5T Returns to Financial Shareholders Improvements Share repurchase Debt repayment up to ¥2T Bond buyback (¥2.5T in total with the previously- Cash reserves announced repurchase
Slide 9: Asset Monetization (¥4.5T Program)
Asset Monetization (¥4.5T Program) ¥4.5T asset monetization already completed; monetized ¥5.6T in just 6 months Prepaid forward Alibaba April to August contracts, etc. $15.4B $15.4B May Block trade *1 ¥0.3T SBKK September Offering *1 ¥1.2T $14.4B June to July Public offering, etc. $18.1B T-Mobile Ju
Slide 10: Offering of SBKK Shares
Offering of SBKK Shares Acquired a mobile telecom business in 2006; monetized ¥3.8T since its listing. Will continue to hold the asset over the medium to long term. Total ¥6.1T Disposal at IPO (shareholding ratio*1:33.7%) ¥2.3T Monetized Block trade (shareholding ratio*1: 5.0%) ¥0.3T ¥3.8T Offering
Slide 11: Debt Reduction
Debt Reduction Reduced debt by ¥1.5T bps SBG CDS*4 (YTD) Repurchase of domestic bonds in July*1 600 Total repurchase amount ¥0.2T 544bps (face value) Total Repayment of Alibaba margin loan in July*2 400 ¥1.5T Fully repaid $9.4B As of Nov 6 256bps (¥1.0T*3) Early repayment of senior loan in September
Slide 12: Returns to Shareholders (Share repurchase)
Returns to Shareholders (Share repurchase) Share repurchase brings higher shareholder value per share; SBG shares outperformed others. Share price performance Share repurchase of Japanese large-cap companies (March 19, 2020*2 ~ November 6, 2020) (Market cap, ¥ T) Authorized amount ¥2.5T #1 Toyota (2
Slide 13: Return to Shareholders (Dividend)
Return to Shareholders (Dividend) Maintained an interim dividend of ￥22 /share Dividend per share*1 (¥) 22.0 22.0 ¥22.0 11.0 11.0 11.0 11.0 11.0 11.0 FY16 FY16 FY17 FY17 FY18 FY18 FY19 FY19 FY20 (Interim) (Year-end) (Interim) (Year-end) (Interim) (Year-end) (Interim) (Year-end) (Interim) *1 Dividend
Slide 14: Progress of ¥4.5T Program (Wrap-up)
Progress of ¥4.5T Program (Wrap-up) Monetization completed. (¥ T) 1.1 • Monetized over ¥4.5T 1.0 Cash reserves, etc. Financial 1.5 improvements • The use of the surplus Executed proceeds will be decided ¥4.5T Program 4.5 debt reduction considering financial 1.3 balance. Remaining amount of share rep
Slide 15: Progress of ¥4.5T Program (LTV)
Progress of ¥4.5T Program (LTV) Excluding asset-backed finance LTV trend*1 25% • Rapid execution of large-scale monetization, taking full 21.9% advantage of highly liquid 18.4% 18.0% 17.9% assets *2 • Flexible financial 11.8% 9.0% management in response to market conditions as articulated in the fin
Slide 16: Status of Assets
- Progress of ¥4.5T Program - Status of Assets - Financial Condition - Financial Strategy - ESG Initiatives Finance 13
Slide 17: Equity Value of Holdings
Equity Value of Holdings Equity value of holdings increased to ¥30.9T driven mainly by higher share prices of investments. 30.9 Excluding asset-backed finance (¥ T) Composition 26.3 60％ Alibaba 24.3 6％ SBKK 9％ SVF1 18.6 3％ SVF2 13.0 4％ T-Mobile (formerly Sprint) 12.6 8％ Arm 7％ Investments in listed
Slide 18: Price Trend of Listed Stockholdings (YTD)
Price Trend of Listed Stockholdings (YTD) Alibaba stock price remains strong. SBKK is trending above the offer price in September. 160 160 Alibaba T-Mobile 150 150 140 140 130 130 120 120 110 Nasdaq 110 S&P500 100 100 Nikkei 90 90 80 80 SBKK 70 70 60 60 50 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Slide 19: Alibaba Share Price Trend
Alibaba Share Price Trend Alibaba's share price has kept rising as a leading technology company. Alibaba’s share price Top 10 Largest public companies by （listing-to-date） market capitalization (as of November 6, 2020) *2 ($ B) 0 500 1,000 1,500 2,000 $290.5 Apple 2,018 Annual Growth Rate of Saudi A
Slide 20: SVF1 & 2: Investment Highlights
SVF1 & 2: Investment Highlights (SBG consolidated basis) Significant growth in asset values driven mainly by a strong demand for online services under COVID-19 and recovery in public stock market. SVF1 SVF2 ($ B) ($ B) 100 90.1B 10 82.7B Exited 1.8 x 7.6 B 80 8 Currently held 1.4 x 60 and listed 6 C
Slide 21: Gain and Loss on Investments
Gain and Loss on Investments (on a SBG Consolidated Basis) Recorded ¥1.1T gain on investments in FY20Q2. (¥ T) 1.1 T (sum of SVF1 and SVF2) On Apr. 1, 2020, Sprint ceased to be a subsidiary of the Company following the completion of the merger between Sprint and T-Mobile US, Inc. Given that investme
Slide 22: Sale of Shares in Arm to NVIDIA
Sale of Shares in Arm to NVIDIA Remain committed to the long-term success of NVIDIA as a major shareholder (approximately 6.7- 8.1% ownership expected). Received by the Company as a deposit*1 Cash $2.0B Cash $10.0B To be received by the Company*2 Transaction upon closing value up to NVIDIA shares*3
Slide 23: Strength of SBG's Portfolio
Strength of SBG’s Portfolio Diversified portfolio comprising leading tech companies with high liquidity Proportion of listed companies Arm (excl. the value related to asset-backed finance) Semicon Amazon Alphabet Facebook Salesforce Adobe SBKK Telecom 77% *2 PayPal T-Mobile Telecom Listed securities
Slide 24: Overview of Asset Management Subsidiaries
Investments in Listed Stocks and Other Instruments; Overview of Asset Management Subsidiaries Fund Name SB Northstar LP Location Cayman Capital*1 $555 million Ownership*2 SBG 67%, Masayoshi Son 33％ Fund life 12 + 2 years *1 The total capital of the Company’s 3 subsidiaries investing in SB Northstar
Slide 25: Listed Stocks Investments: Purpose and Management Policy
Investments in Listed Stocks and Other Instruments; Purpose and Management Policy Purpose Diversify assets Manage surplus funds Management Policy Investment theme = Investing in Vision. Provide leading listed tech companies with risk capital with a focus on IT innovation and emerging business models
Slide 26: Investment Gain (Loss) for FY20 Q1-2
Investments in Listed Stocks and Other Instruments; Investment Gain (Loss) for FY20 Q1-2 ¥263.8B Valuation gain +¥96.6B Valuation gain (loss) + Realized gain Realized gain (loss) +¥167.2B -¥103.1B +¥131.8B 0.15B Valuation gain (loss) -¥131.7B + Realized gain (loss) -292.3B 現物株式 Actual stocks 現物株式 Ac
Slide 27: Actual Stocks (as of Sep 30, 2020)
Investments in Listed Stocks and Other Instruments; Actual Stocks（as of Sep 30, 2020) ($ M) Fair value Adobe 685 Alphabet Class A 1,221 Alphabet Class C 206 Amazon.com 6,331 Facebook 2,222 Microsoft 370 Netflix 1,024 PayPal Holdings 249 Salesforce.com 69 TSMC ADR 256 Zoom Video Communications 1,801
Slide 28: Options (as of Sep 30, 2020)
Investments in Listed Stocks and Other Instruments; Options (as of Sep 30, 2020) $24.5B (net) $72.1B $3.4B (net) Long call option of listed stocks $4.7B -$1.3B Short call option of listed stocks -$47.6B Fair value Notional principal Finance 25
Slide 29: Risk Management
Investments in Listed Stocks and Other Instruments; Risk Management All investments are conducted in accordance with IC-approved investment strategy and risk management policy. Under the responsibility of the CRO, Counterparty Liquidity exposure Daily P/L Market risk are monitored on a daily basis.
Slide 30: Financial Condition
- Progress of ¥4.5T Program - Status of Assets - Financial Condition - Financial Strategy - ESG Initiatives Finance 27
Slide 31: LTV
LTV Excluding asset-backed finance 17.9% 11.8% Secured an even larger financial cushion with the progress of the ¥4.5T program FY19Q4 FY20Q2 (Mar' 20) (Sep' 20) * As of the end of each quarter * See "LTV Calculation: SBG Standalone Net Debt" and "LTV Calculation: SBG Standalone Equity Value of Holdi
Slide 32: Cash Position
Cash Position Always maintain ample cash position, more than the amount of the bond redemptions for two years Cash position Bond redemption schedule *3 ¥2.4T *1, 2 （¥ B) Bond redemptions for the next 2 years (¥1.4T) ＞ 505.6 897.0 827.6 890.5 Sep' 20 Oct' 20 - Sep' 21 Oct' 21 - Sep' 22 Oct' 22 - Sep'
Slide 33: SBG Standalone Interest-bearing Debt
SBG Standalone Interest-bearing Debt*1 Main variance factors from June-end 2020 Decreased by debt repayment Bank loans and CPs (-¥341.3B) Bonds (-¥158.6B) (¥ B) Margin loan (-¥555.6B) Financial liabilities relating to prepaid forward contracts (+¥191.5B) 9,803.6 9,319.8 Breakdown as of September-end
Slide 34: SBG Standalone Cash Position
SBG Standalone Cash Position*1 Maintained ample cash position through large-scale monetization. (¥ B) 4,601.6 4,158.1 SB Northstar (Cash and deposits and listed stocks under management) 2,175.0 Main variance factors from June-end 2020 2,093.9 to September-end 2020 1,728.9 1,818.3 Increase Decrease S
Slide 35: SBG Standalone Net Interest-bearing Debt
SBG Standalone Net Interest-bearing Debt*1 Excluding Net Interest-bearing Increased through returns to shareholders and Debt of SB Northstar management of cash on hand (¥ B) 6,528.9 6,240.1 6,463.0 5,522.9 5,645.5 Adjustments relating to finance 2,887.1 Asset-backed finance ( -¥2,861.9B) Hybrid fina
Slide 36: Bond Redemption Schedule
Bond Redemption Schedule Exploring various redemption options with refinancings as a main option (¥ B) 1,221.6 Domestic straight bonds Domestic subordinated bonds Domestic hybrid bonds 455.6 924.1 Foreign currency-denominated senor bonds 890.5 Foreign currency-denominated hybrid bonds 291.0 424.1 58
Slide 37: Financial Strategy
- Progress of ¥4.5T Program - Status of Assets - Financial Condition - Financial Strategy - ESG Initiatives Finance 34
Slide 38: Financial Strategy for FY2020
Financial Strategy for FY2020 Flexible financial management adapting to any change Agile financial Firmly keeping management in financial policy response to market conditions Finance 35
Slide 39: Firmly Keeping Financial Policy (1/2)
Firmly Keeping Financial Policy (1/2) 1. Manage LTV below 25% in normal times (upper threshold of 35% even in times of emergency) 2. Maintain cash position covering bond redemptions for at least the next 2 years 3. Secure sustainable distribution and dividend income from SVF and other subsidiaries F
Slide 40: Policy on Supporting Portfolio Companies
Firmly Keeping Financial Policy (2/2): Our Policy on Supporting Portfolio Companies Portfolio company finances to be No rescue self-financing package Finance 37
Slide 41: Agile Financial Management in Response to the Market
Agile Financial Management in Response to the Market Achieving both shareholder return and financial improvement by implementing the ¥4.5T Program Appropriately control the balance between new investments and exits (prepare for future investment opportunities) Financial management focused on dialogu
Slide 42: ESG Initiatives
- Progress of ¥4.5T Program - Status of Assets - Financial Condition - Financial Strategy - ESG Initiatives Finance 39
Slide 43: SBG's Approach to ESG
SBG's Approach to ESG Continue essential initiatives for ESG • Take the initiative in addressing changing social issues and lead to trends in society • Continue to discuss what we should address and put them into practice Further strengthen the communication • With the appointment of Chief Sustainab
Slide 44: E: Environment Initiatives - Renewable Energy
E: Environment Initiatives - Renewable Energy - SBG ・Recognized the importance of renewable energy earlier than Paris Agreement and SDGs in 2015 ・Contributing to lay groundwork to the spread of renewable energy in Japan and overseas since 2011 - Established the Renewable Energy Governors’ Alliance (
Slide 45: S: Social Initiatives - COVID-19 Responses
S: Social Initiatives - COVID-19 Reponses - SBG ・Quick responses to changing situations ・Proactive initiatives for early normalization of medical and economic activities Lack of personal protective Increased need for PCR testing Unclear infection situation in Japan equipment for medical personnel to
Slide 46: SB Opportunity Fund
S: Social Initiatives - Diversity & Inclusion - Funds Actively supporting underrepresented founders to create a more diverse society “SB Opportunity Fund” The largest venture fund dedicated solely to underrepresented racial minorities in US ($100M) Targeting Black, Latinx, Native Americans founders
Slide 47: Emerge Program
S: Social Initiatives - Diversity & Inclusion - Funds “Emerge Program” Targeting underrepresented founders of diverse races, LGBTQ, etc. Invested in 12 companies so far, and 5 of them closed their rounds Accelerator program that connect with SoftBank ecosystem Finance 44
Slide 48: Simprints
S: Social Initiatives - Gap Elimination Efforts- Arm Contributions to gap elimination and social innovations using IT “Simprints” The mechanism that allows people to use fingerprint as ID Accessible to life services (medical care, education, banking etc.) Introduced in 11 countries | Provided to 250
Slide 49: IoT Challenge
S: Social Initiatives - IT Professionals Development - SoftBank KK Providing programming education opportunities for the development of future IT professionals “IoT Challenge” Provide creative programming education, that combines robot programming using Pepper and highly scalable micro:bit Finance 4
Slide 50: G: Governance
G: Governance Implementing governance appropriate for a strategic investment company while balancing agile decision-making and risk mitigation For higher transparency and trust (efforts to gain better understanding from the capital markets) Establishment of the Improve transparency in the process of
Slide 51: G: Governance
G: Governance Corporate governance enhancements and appointment of corporate officers • Increased the proportion of External Board Directors on the Board: four external out of nine External ratio increased : 4/13 (30.8%) ➡ 4/9 (44.4%); top-ranked ratio among companies listed on the first section o
Slide 52: Appendix
Appendix
Slide 53: Direction of Financial Management (illustrative)
Direction of Financial Management (illustrative) • Conservative financial management with asset monetization in the COVID-19 market environment • Securing financial stability and preparing for future investment opportunities Value increases in the mid-term; Improving LTV Enables balancing elevated l
Slide 54: SBG Credit Rating Trend
SBG Credit Rating Trend Aim to improve credit rating under the investment holding company rating criteria Acquisition of Acquisition of Acquisition Acquisition Listing Japan Telecom Vodafone KK of Sprint of Arm of SBKK A+ 14 A 13 A- 12 JCR (A－) Outlook Stable BBB+11 BBB 10 BBB- 9 BB+ 8 S&P (BB＋) Out
Slide 55: LTV Calculation: SBG Standalone Net Debt
LTV Calculation: SBG Standalone Net Debt (L) Adjusted SBG standalone net debt*1 ¥3.64T (V) SBG standalone = 11.8% ¥30.94T equity value of holdings = - - Adjusted SBG Consolidated Net debt at self- Other adjustments standalone net debt net debt financing entities (¥ T) 3.64 9.07 2.54 2.89 SoftBank se
Slide 56: LTV Calculation: SBG Standalone Equity Value of Holdings
LTV Calculation: SBG Standalone Equity Value of Holdings (L) Adjusted ¥3.64T SBG Standalone Net Debt (V) SBG Standalone = 11.8% Equity Value of Holdings ¥30.94T SBG standalone Interest of SBG in Other, investments in holdings = Major shares + SVF1/SVF2 + listed stocks, etc. (¥ T) 30.94 24.18 3.67 3.
Slide 57: SVF1: Capital Commitment
SVF1: Capital Commitment (as of September 30, 2020) ($ B) 98.6 (83.9) SBG 33.1*1 （28.4） 65.5 （55.5） Third-party limited partners * Numbers in brackets represent amounts contributed. * 1 The presented SBG’s committed capital to SVF1 includes approximately $8.2 billion of an obligation satisfied by us
Slide 58: SVF1 Snapshot
SVF1 Snapshot (as of Sep. 30, 2020) 1. Gross Return to SVF1 is the sum of the cumulative Gross Realized Proceeds from exited and partially exited investments and Fair Market Value of unrealized investments held by SVF1 as of September 30, 2020. Gross Gain/(Loss) to SVF1 is the difference between the
Slide 59: SVF1 Listed Portfolio Companies
SVF1 Listed Portfolio Companies (as of Sep. 30, 2020) ※3 1. Listed company total only includes companies that have become publicly listed on or after the date SVF1 made its initial investment in the companies. The companies indicated as fully exited are fully exited companies that became publicly li
Slide 60: SVF2 Snapshot
SVF2 Snapshot (as of Sep. 30, 2020) 1. Gross Return to SVF2 is Fair Market Value of unrealized investments held by SVF2 as of September 30, 2020. Gross Gain/(Loss) to SVF2 is the difference between the Gross Return to SVF2 and Investment Cost to SVF2. Gross Realized Proceeds are before tax and expen
Slide 61: SVF2 Listed Portfolio Companies
SVF2 Listed Portfolio Companies (as of Sep. 30, 2020) 1. Listed company total only includes companies that have become publicly listed after SVF2 made its initial investment in the companies. 2. Gross Return = Unrealized value. SBG’s return on any SVF2 portfolio company is not the full return amount
Slide 62: Subsequent Event: Finance Using Collar Transaction
Subsequent Event: Finance Using Collar Transaction SBG executed amendments to the outstanding collar transaction by way of restriking to pursue the upside from the rise in stock price. Transaction costs recorded as a one-time loss. Pre-amendment Post-amendment Gain from Gain from collar transaction
Slide 63: Consolidated Interest-bearing Debt
Consolidated Interest-bearing Debt*1 (¥ B) Interest-bearing debt ＋ Lease liabilities 19,250.0 18,088.6 15,869.1 15,497.8 7,969.0 Of which SB Northstar*2 14,272.2 364.3 7,616.9 307.1 283.5 9,803.6 SBG standalone 721.3 9,319.8 624.3 8,281.3 Others (Arm, etc.) SVF1 5,351.1 4,727.6 SoftBank segment 328.
Slide 64: Consolidated Cash Position
Consolidated Cash Position*1 (¥ B) 6,426.8 5,918.7 2,175.0 Of which SB Northstar*2 4,005.9 SBG standalone 3,553.2 4,158.1 4,601.6 Others (Arm, etc.) 3,244.6 SVF1 2,093.9 1,728.9 SoftBank segment 1,818.3 Sprint segment*3 322.9 428.6 459.1 411.1 245.6 96.5 140.5 408.1 256.7 876.9 900.1 197.2 1,044.7 1
Slide 65: Consolidated Net Interest-bearing Debt
Consolidated Net Interest-bearing Debt*1 (¥ B) Interest-bearing debt ＋Lease liabilities – Cash position 15,696.8 14,082.7 6,240.1 11,027.6 10,881.7 (Excl. SB Northstar） 5,522.9 9,950.5 -1,810.7 SB Northstar*2 580.8 9,071.0 378.7 6,463.0 SBG standalone 5,645.5 4,718.2 4,451.0 3,850.7 Others (Arm, etc
Slide 66: SoftBank
SoftBank