Neural Group Inc. · TSE:4056
Neural — Q3 2024 Earnings Presentation
38 slides from Neural's earnings presentation, Nov 8, 2024
Slide 1: Financial Results Briefing Material 7th term, Q3 ended September 30, 2024
Update the world for a better tomorrow Financial Results Briefing Material 7th term, Q3 ended September 30, 2024 Neural Group Inc. November 8, 2024 Copyright © Neural Group Inc. All Rights Reserved.
Slide 2: FY2024 (7th term) Q3 earnings highlights and business strategy updates
FY2024 (7th term) Q3 earnings highlights and business strategy updates 【Overview】 • Leveraging the maturation of our proprietary AI services in FY2023, we successfully built a structure for increased revenue and profitability in FY2024. In the third quarter of FY2024, following the strong performanc
Slide 3: Financial highlights and business model; Introduction to our services; Overview
• Financial highlights and business model Introduction to our services • Introduction to our services Overview of Neural Group • Overview of Neural Group Copyright © Neural Group Inc. All Rights Reserved. 2
Slide 4: Financial highlights for the Q3 ended September 30, 2024
Financial highlights for the Q3 ended September 30, 2024 ① Revenue Growth ② Cost Optimization (SG&A) Compared to Q3 of FY2023 Compared to Q3 of FY2023 +10.9% growth ¥139 Mn reduction Compared to cumulative Q1-Q3 of FY2023 Compared to cumulative Q1-Q3 of FY2023 +17.1% growth ¥283 Mn reduction ③ Build
Slide 5: Revenue Growth: Quarterly revenue
① Revenue Growth Quarterly revenue (JPY Millions) FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 (2nd term) (3rd term) (4th term) (5th term) (6th term) (7th term) +11% 991 984 880 908 819 772 781 734 640 603 514 288 294 251 226 202 163 164 184 126 62 91 33 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 6: Cost Optimization (SG&A): Quarterly SG&A cost
② Cost Optimization (SG&A) Quarterly SG&A cost • While sales increased by 11% YoY, quarterly SG&A costs were reduced （JPY Millions） by ¥161 million (with an annualized impact of ¥644 million) compared to FY23 Q2, when cost optimization initiatives began. -161 （Annualized: -644) • At the end of Q2, p
Slide 7: Building a profitable structure
③ Building a profitable structure Evolution of our business models and quarterly operating profit performance. After six years since its founding, successfully （JPY Millions） established a scalable AI service structure. We started our business by We have shifted our business model We achieved profit
Slide 8: Relationship between revenue and OP (monthly results)
③ Building a profitable structure Relationship between revenue and OP (FY2023–FY2024 monthly results) （JPY Millions） Despite maintaining Monthly operating a high contribution profit margin of 60% in 120 FY2023, further 100 FY2023 1st half, FY2024 improvement is 80 60 2nd half, FY2024 expected in FY2
Slide 9: Consolidated financial results for the Q3 ended September 2024
Consolidated financial results for the Q3 ended September 30, 2024 – Achieved quarterly operating profitability FY2023 FY2024 Increase/ Change in (JPY Millions) Q3 Actual Q3 Actual Decrease Percentage Revenue 819 908 +89 +10.9% Gross profit 518 591 +73 +14.1% Percentage of revenue 63.3% 65.1% EBITDA
Slide 10: Consolidated financial results for the cumulative Q1-Q3
Consolidated financial results for the cumulative Q1-Q3, 2024 – All metrics improved significantly year-on-year, with cumulative EBITDA also turning positive. FY2023 FY2024 Q1-Q3 Q1-Q3 Increase/ Change in (JPY Millions) Actual Actual Decrease Percentage Revenue 2,194 2,569 +375 +17.1% Gross profit 1
Slide 11: Consolidated full-year financial estimate for FY2024
Consolidated full-year financial estimate for FY2024 Progressing smoothly FY2023 FY2024 Increase/ Change in (JPY Millions) Actual Estimate Decrease Percentage Revenue 3,178 3,700 +522 +16.4% Gross profit 2,063 2,550 +487 +23.6% Percentage of revenue 64.9% 68.9% EBITDA -490 180 +670 - Percentage of r
Slide 12: Progressing smoothly towards our business targets for FY2024
Progressing smoothly towards our business targets for the fiscal year ending December 31, 2024. Quote from the “FY23 Financial Results Briefing Materials” FY2024 Key Performance Targets A B C D Return to Quarterly profitability in Net income for Operating operating operating the second profit for th
Slide 13: Our growth strategy
Our growth strategy Revenue Business model AI technology expansion evolution exploration • Expand and • Enhance the • Implement cutting- accelerate recurring nature edge AI tech- profits by scaling of the revenue nologies in image proprietary AI model. and audio domains services. into proprietary •
Slide 14: Introduction to our services
Financial highlights and business model • Financial highlights and business model • Introduction to our services Overview of Neural Group • Overview of Neural Group Copyright © Neural Group Inc. All Rights Reserved. 13
Slide 15: Released a 1-on-1 support service to improve employee work comfort
Released a 1-on-1 support service to improve employee work comfort and accelerate their growth. 1-on-1 support services Examples of Customers KizunaNavi uses state-of-the-art AI analysis technology to improve the quality of 1-on-1 meetings. M1＋ By facilitating effective 1-on-1s, we support the signi
Slide 16: Started collaboration with Japan Management Association Management Center
Started collaboration with “Japan Management Association Management Center” and promoting service expansion At the Japan Management Association Management Center (JMAM), a specialized human resource development organization, KizunaNavi was test introduced. Feedback for service improvement and expert
Slide 17: 1-on-1s is becoming increasingly important
1-on-1s is becoming increasingly important. Employee dissatisfaction Changes in employee work ethic. with the workplace. young employees Workplace Dissatisfaction Ranking 1. Greater motivation for personal growth — Survey of 500 Men and Women — 2. Stronger sense of independence 3. Increased demand f
Slide 18: 1-on-1 is a method to improve engagement on a daily basis
1-on-1 is a method to improve engagement on a daily basis. Employee survey Employee training 1on1/feedback Engagement enhancement activities Understand employee Identify issues and organizations, In actual organizational and engagement by organization and and conduct group-based business settings, w
Slide 19: To implement effective 1-on-1 meetings, some ingenuity is required
To implement effective 1-on-1 meetings, some ingenuity is required Typical 1-on-1 Ideal 1-on-1 Main actor • Managers play the leading • Members play the leading role. role. Managers ideally spend 60–70% of the time listening, with advice kept concise and focused. Purpose • Conveying performance • Ad
Slide 20: Conducting high-quality 1-on-1 meetings is not easy
Conducting high-quality 1-on-1 meetings is not easy Three Challenges in achieving effective 1-on-1 meetings Challenges for Members Challenges for Managers Challenges in Continuity Are you able to Is there variation Are 1-on-1 openly and in the meetings being honestly discuss effectiveness of held co
Slide 21: Success of 1-on-1 meetings depends on manager's questioning and advising skills
Success of 1-on-1 meetings depends on the manager's questioning and advising skills. I am aiming for a raise this year, and I would like to mentor subordinates next year. Could Question from member you tell me if there are any achievements I am currently lacking? Suggested question/advice • "To aim
Slide 22: KizunaNavi supports high-quality and continuous 1-on-1 meetings
KizunaNavi supports the implementation of high-quality and continuous 1-on-1 meetings Members organize their 01 discussion topics in advance Provide feedback to 02 managers Visualize the status and 03 effectiveness of continuous implementation KizunaNavi incorporates all of these three key elements
Slide 23: Providing services for smart city development using AI cameras
Providing services for smart city development using AI cameras. For outdoor flat parking lots, a single camera can capture over 100 parking spaces. Congestion analysis based on line counting at parking lot entrances and exits is also available. 1 Real-time availability management 2 3 Guiding drivers
Slide 24: Top share in Japan with more than 12,000 LED signage installations
Top share in Japan with more than 12,000 LED signage installations ➢ Unparalleled installation track record Experience in a wide variety of industries, LED Signage including large corps, government offices, No.1 commercial facilities, and merchant stores. ➢ Unparalleled track record of stable operat
Slide 25: Expanding AI-driven web businesses with ChatGPT
Expanding AI-driven web businesses with ChatGPT. Generative Web powered by ChatGPT Feature 1 Automatic Blog Feature 2 Multilingual Generation Conversion Function 3: Word-of-mouth Feature 4 SEO auto-reply Automation • Leveraging the extensive sales network of Neural Marketing Co. (a wholly owned subs
Slide 26: Overview of Neural Group
Financial highlights and business model • Financial highlights and business model Introduction to our services • Introduction to our services • Overview of Neural Group Copyright © Neural Group Inc. All Rights Reserved. 25
Slide 27: Edge AI & Smart City Solutions
Neural Group solves social issues in cities through Edge AI and enhances spatial value. Edge AI & Smart City Solutions Mobility, traffic control Safety and efficiency using Edge AI Fashion trend analysis using image AI Number plate and vehicle detection Work style reform and human capital utilizatio
Slide 28: We develop proprietary AI libraries and edge implementation technologies
We develop proprietary AI libraries/ edge-related implementation technologies to enable AI 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 estimation detection
Slide 29: AI technology is evolving along with the industry's growth
AI technology is evolving along with the industry’s growth Cloud AI Edge AI Conventional approach Our approach Original data (video, etc.) before AI analysis Metadata after AI analysis (text data) Real-time marketing and security data AI analysis in a large cloud server Shift Large scale Small scale
Slide 30: Edge AI has a large global market size and high growth potential
Edge AI has a large global market size and offers high growth potential. The Edge AI market is growing We operate in many of the key at an annual rate of 33.3% growth segments Global: Edge AI Market, in USD billions Global: Breakdown of Edge AI Market by Industry (2023) Our business fields 2,698 CAG
Slide 31: Our AI libraries operate on a variety of technical standards
Our AI libraries operate on a variety of technical standards, contributing as an Edge AI Platform developer As an NVIDIA Metropolis Partner, we actively adopt the NVIDIA Jetson series. Processor JETSON Xavier NX JETSON Nano JETSON TX2 OS Language Processor OS Language Copyright © Neural Group Inc. A
Slide 32: Continuing advanced AI research
Continuing advanced AI research: By continually integrating new technologies into our services, we accelerate platformization and generalization, while also contributing to building barriers to market entry. Image generation AI model Multitask AI model Uncompromising AI accuracy • Cutting-edge AI te
Slide 33: Management team
Management team Founder & CEO, Roi Shigematsu, Advisor, Yutaka Matsuo • Partner at McKinsey & Company. • Professor, Artificial Engineering Research Center, • Led private equity investments at Bain Capital. Graduate School of Engineering, The University of Tokyo • Advisory Board of The Faculty of Eng
Slide 34: Partnered with many public and private organizations
Partnered with many public and private organizations to promote AI services through an extensive network. Industry groups General Incorporated Association Japan Parking Association Public-Service Corporation JAPAN INSTITUTE OF LOGISTICS SYSTEMS Collaboration with corporations Smart City related Mini
Slide 35: Appearances at seminars/events
Appearances at seminars/ events AI technology ▪ Tokyo Data Platform Convention Professional Advisor ▪ RX Japan NexTech Week2022【Fall】 Lecture title “Smart Cities Today” ▪ Macnica: Possibilities in Retail for Image Recognition AI Speaker on Image Recognition AI ▪ AI Innovation AWARD2022 “Future envis
Slide 36: Promoting capital and business alliances while ensuring share liquidity
Promoting capital and business alliances with operating companies while ensuring share liquidity by expanding floating shareholders Note: Based on shareholders' register as of June 30, 2024 General shareholders General shareholders floating shares*1 General shareholders floating shares floating shar
Slide 37: Update the world for a better tomorrow
Update the world for a better tomorrow Neural Group, Inc. We named our company "Neural Group" to express our desire to provide inspiring services that transcend boundaries across a wide range of fields through the development of cutting-edge technologies, including AI. We aim to leverage edge AI tec
Slide 38: 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