Heroz, Inc. · TSE:4382
Heroz — FY2019 Earnings Presentation
27 slides from Heroz's earnings presentation, Jun 12, 2019
Slide 1: Presentation Material for FY04/2019 Full Year Financial Results
Notice This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail. Presentation Material for FY04/2019 Full Year Financial
Slide 2: 1. Business Overview
1. Business Overview 2. FY04/2019 Full Year Performance 3. FY04/2020 Forecast 4. Growth Strategy
Slide 3: Company Overview
Company Overview 2018 Name HEROZ, Inc. Listed on Tokyo Stock Exchange (TSE) Mothers Capital and business alliance with Netmarble Games Corporation Location PMO Tamachi 2F, 5-31-17 Shiba, Minato-ku, Tokyo 2017 Capital and business alliances with Takenaka Corporation and Koei Established April 2009 Te
Slide 4: Our Vision: Creating the future through AI revolutions
Our Vision Creating the future through artificial intelligence (AI) revolutions 4
Slide 5: Global Leader in Mind Game AI
Global Leader in Mind Game AI Chess AI Shogi AI Go AI Deep Blue (’97) AI developed by our Google acquired Deep Mind defeated a engineers defeated a (’14) professional Chess professional Shogi AlphaGo, developed by player (Japanese Chess) Deep Mind, defeated a player (’13) professional Go player (’16
Slide 6: B-to-B Services: Machine Learning by Replacing Shogi Game Records with Other Data
B-to-B Services: Machine Learning by Replacing Shogi Game Records with Other Data Structural design data, Shogi game records financial data, etc. HEROZ Kishin Deep learning and other machine learning: MLaaS (Machine Learning as a Service) Shogi AI Construction AI, Finance AI, etc. MLaaS： What is Mac
Slide 7: B-to-B Services: Profit Model and High Switching Costs
B-to-B Services: Profit Model and High Switching Costs Research/develop Shogi AI Standardize AI technology accumulated through shogi AI Establish “HEROZ Kishin”=MLaaS （Machine Learning as a Service） Establish an infrastructure which allows HEROZ to provide AI services efficiently Output after machin
Slide 8: B-to-B Services: Engines included in HEROZ Kishin and Examples of Applications
B-to-B Services: Engines included in HEROZ Kishin and Examples of Applications ◼ Create AI products by combining engines and achieve an efficient operating structure Know-how on AI-related technology development and and R&D capabilities service operations (deep learning, etc.) (massive servers, etc.
Slide 9: B-to-B Services: Areas of Focus and Examples of Services Provided
B-to-B Services: Areas of Focus and Examples of Services Provided ◼ Focusing on construction, finance, and entertainment for the foreseeable future ◼ Earning structure is initial setup fee and ongoing fees *Examples of clients served Construc Fi- Enter- -tion nance tainment Creation of high-quality
Slide 10: B-to-C Services: Fees from Application Users
B-to-C Services: Fees from Application Users Charging fees for B-to-C content which user AI ◼ Leveraging AI-related technology to provide mind games such as shogi, chess, and backgammon worldwide ◼ Shogi Wars has remained cash cow backed by organic increase of paid users Shogi Wars Animal Igo Wars C
Slide 11: 2. FY04/2019 Full Year Performance
1. Business Overview 2. FY04/2019 Full Year Performance 3. FY04/2020 Forecast 4. Growth Strategy
Slide 12: Our Key Performance Indicator
Our Key Performance Indicator ◼ We believe that EBITDA, as calculated below, is our key performance indicator EBITDA = Operating Profit + Depreciation/Amortization Expenses ◼ In AI-related businesses, server investments, etc. are required to engage in advanced machine learning, leading to various de
Slide 13: FY04/2019 Full Year Financial Performance
FY04/2019 Full Year Financial Performance ◼ In FY04/2019, net sales of 1,377 million yen (+19.2% year-on-year) and EBITDA of 470 million yen (+31.7% year-on-year) exceeded our forecast because of revenue contributions from AI (B-to-B) projects not included in our original pipeline, etc ◼ Net sales,
Slide 14: Net sales and EBITDA Trends
Net sales and EBITDA Trends ◼ Net sales from AI (B-to-B) services and AI (B-to-C) services in FY04/2019 were about +120% and about -10% respectively on a year-on-year basis. (Revenues from AI (B-to- C) services decreased due to no revenue contributions from several unprofitable services terminated d
Slide 15: COGS and SG&A Trends
COGS and SG&A Trends ◼ Labor cost in FY04/2019 increased by about 30% because of newly hired engineers, etc ◼ COGS and SG&A increased in FY04/2019 Q4 because of a one time cost increase by proactive efforts to standardize development tools and to step up our advertising and publicity efforts 956 (Un
Slide 16: Service Overview and Marginal Profit
Service Overview and Marginal Profit ◼ Characteristics of AI (B-to-B) and AI (B-to-C) services are summarized below Service AI（B-to-B) Services AI（B-to-C） Services B-to-B machine learning service Summary Shogi Wars, etc. HEROZ Kishin Structural Design data, financial data, Input Data Shogi game reco
Slide 17: Balance Sheet (as of April 30, 2019)
Balance Sheet (as of April 30, 2019) ◼ We have continued to invest cash and deposits in efforts to achieve the medium-to-long- term growth strategy (computing servers, R&D, etc.) ◼ Increased PP&E, computing servers for about 200 million yen adopting 5-year declining balance method, have enabled us t
Slide 18: 3. FY04/2020 Forecast
1. Business Overview 2. FY04/2019 Full Year Performance 3. FY04/2020 Forecast 4. Growth Strategy
Slide 19: FY04/2020 Financial Forecast
FY04/2020 Financial Forecast ◼ Net sales of AI (B-to-B) services are forecasted to exceed those of AI (B-to-C) services in FY04/2020. ◼ We forecast revenues of ¥1,630 million, EBITDA of ¥570 million and an EBITDA margin of 35.0%. We expect each figure to increase relative to the previous year, throu
Slide 20: 4. Growth Strategy
1. Business Overview 2. FY04/2019 Full Year Performance 3. FY04/2020 Forecast 4. Growth Strategy
Slide 21: Medium-to-long term Growth Strategy
Medium-to-long term Growth Strategy ◼ We aim to achieve EBITDA growth by investing our cash flows and leveraging our know-how from our AI (B-to-C) services to our AI (B-to-B) services, which ・EBITDA are positioned as our key medium-to-long-term pillar of growth ◼ In our AI (B-to-B) services, we aim
Slide 22: Global Market Forecasts: AI Software (B-to-B)
Global Market Forecasts: AI Software (B-to-B) ◼ AI demand is accelerating globally in each industry, leading us to believe that our AI (B-to-B) service carries strong growth potential ◼ AI software market in Japan is also required to grow so rapidly due to the decrease of the domestic working popula
Slide 23: Japan: Potential AI Demand is Among the Largest Worldwide
Japan: Potential AI Demand is Among the Largest Worldwide ◼ Potential AI demand in Japan can be expected to be among the largest worldwide, as the working population is expected to decrease significantly going forward Projection of Population Age 15-64 (Median Prediction Interval, 2015=100) 140 ◼ Wh
Slide 24: Potential AI Demand in Our Areas of Focus
Potential AI Demand in Our Areas of Focus ◼ We believe there is also significant potential demand for enhancing operational efficiency through AI in the construction industry, which is one of our areas of focus ◼ There will be a shortage of 110,000 construction technicians by 2025 (source: Human Tou
Slide 25: Initiatives in Finance AI
Initiatives in Finance AI ◼ Launched AI Equity Portfolio Diagnosis (patented), co-developed with SMBC Nikko Securities, for individual customers ◼ AI makes proposals on equity portfolios for each retail investor AI proposes a more efficient portfolio individually based on each investors’ available c
Slide 26: Initiatives in Entertainment AI
Initiatives in Entertainment AI ◼ We cooperated in the development of ZENONZARD, the first title in the new digital card game brand AI CARDDASS developed by Bandai Co., Ltd., by developing AI devoted to card games which leverages HEROZ Kishin ◼ AI to support players (= Partner AI) The partner AI pro
Slide 27: Disclaimer
Disclaimer The contents set out in this material are prepared based on generally acknowledged economic, social and other conditions, and on certain assumptions deemed rational by HEROZ, Inc. and may therefore be subject to change without prior notice due to changes in the managerial environment or f