HEROZ, Inc. · TSE:4382
HEROZ — Q3 FY04/2021 Earnings Presentation
27 slides from HEROZ's earnings presentation, Mar 12, 2021
Slide 1: Presentation Material for FY04/2021 Q3 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 FY04/2021 Q3 Financial Results
Slide 2: 1. Business Overview
1. Business Overview 2. FY04/2021 Q3 Performance 3. Growth Strategy 4. Reference Materials
Slide 3: Company Overview
Company Overview 2019 Listed on the First Section of Tokyo Stock Exchange (TSE) Name HEROZ, Inc. 2018 Listed on Tokyo Stock Exchange (TSE) Mothers Location PMO Tamachi 2F, 5-31-17 Shiba, Minato-ku, Capital and business alliance with Netmarble Games Corporation Tokyo 2017 Established April 2009 Capit
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 Client’s data sent
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 increase of paid users on a YoY basis ◼ Staying home by COV
Slide 11: 2. FY04/2021 Q3 Performance
1. Business Overview 2. FY04/2021 Q3 Performance 3. Growth Strategy 4. Reference Materials
Slide 12: Our Key Performance Indicator: EBITDA
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: Updated Assumptions related to COVID-19
Updated Assumptions related to COVID-19 ◼ We update our assumptions regarding the new coronavirus infection to estimate earnings forecast as follows, but have not revised our earnings forecast announced at the beginning of this fiscal year Original assumptions to FY04/2021 Updated assumptions to est
Slide 14: Analysis of Risks relating to COVID-19
Analysis of Risks relating to COVID-19 AI (B-to-B) Services AI (B-to-C) Services • Delays in documentation (contracts, receipts, etc.) and decreased opportunities for sales discussions • Increased revenues from mobile due to work from home apps such as Shogi Wars Materialized Impact • Some clients h
Slide 15: Performance Overview (May 2020-January 2021)
Performance Overview (May 2020-January 2021) ◼ Revenues increased in Q3 on a year-on-year basis backed by growth of AI (B-to-C) although AI (B-to-B) services decreased due to emergency declared for COVID-19 ◼ EBITDA and other profits made steady progress towards achievement of fiscal year forecasts
Slide 16: Net sales and EBITDA Trends
Net sales and EBITDA Trends ◼ Net sales of AI (B-to-B) services, the core pillar of our growth strategy, declined in Q3 due to reduced opportunities for business meetings by COVID-19 ◼ Net sales of AI (B-to-C) services increased compared with the previous fiscal year led by “Shogi Wars” (Units: JPY
Slide 17: COGS and SG&A Trends
COGS and SG&A Trends ◼ Labor cost has increased on a year-on-year basis and is expected to keep growing next fiscal year as well to increase our engineering capacity, which will lead to our medium- to-long term growth ◼ In addition, there were an increase in app commission fees by growth of AI (B-to
Slide 18: Balance Sheet (as of January 31, 2021)
Balance Sheet (as of January 31, 2021) ◼ B/S remains strong backed by cash and deposits increased via public offering in 2019 ◼ We plan to invest them in efforts to achieve the medium-to-long term growth strategy (e.g. hiring for AI engineers, in-house computing servers and external cloud computing
Slide 19: 3. Growth Strategy
1. Business Overview 2. FY04/2021 Q3 Performance 3. Growth Strategy 4. Reference Materials
Slide 20: 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 t
Slide 21: Use of Our AI in DX
Use of Our AI in DX ◼ Domestic DX (digital transformation) is expected to accelerate due to the future decrease in the working population as well as the impact of the COVID-19 pandemic ◼ AI allows for DX of a wide variety of operations including those involving decision- making, which were previousl
Slide 22: Initiatives Aimed at Achieving the Growth Strategy
Initiatives Aimed at Achieving the Growth Strategy ◼ Joining the " SDGs for Regional Revitalization Public-Private Partnership Platform” ◼ On December 2, 2020, we joined the " SDGs for Regional Revitalization Public- Private Partnership Platform" established by the Cabinet Office. The platform was e
Slide 23: 4. Reference Materials
1. Business Overview 2. FY04/2021 Q3 Performance 3. Growth Strategy 4. Reference Materials
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: 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, 2020=100) ◼ When d
Slide 26: Initiatives to Prevent Spread of COVID-19
Initiatives to Prevent Spread of COVID-19 ◼ We continue to promote efforts to prevent the spread of COVID-19 and prioritize health and safety of our stakeholders including our employees ◼ There is no significant impact on operations and labor productivity ～April 2020 May June～ ・Introduced a selectiv
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