SoftBank Group Corp. (SFTBY) Q1 2024 Earnings Call Transcript

SoftBank Group Corp. (OTCPK:SFTBY) Q1 2024 Earnings Conference Call August 7, 2024 3:30 AM ET

Company Participants

Yoshimitsu Goto – Board Director & CFO

Conference Call Participants

Minoru Satake – Nikkei Newspaper
Daisaku Masuno – Nomura Securities

Operator

Thank you very much for waiting, everyone. Now we would like to start SoftBank Group Corp. Earnings Results Announcement for the three-month period ended June 30, 2024.

First of all, I would like to introduce today’s participants. From left, we have Yoshimitsu Goto, Board Director and CFO; Kazuko Kimiwada, Corporate Officer, Senior Vice President and Head of Accounting Unit; Navneet Govil, CFO, SB Investment Advisors and SB Global Advisors; and last but not least, Jason Child, Executive Vice President, CFO, Arm. Thank you very much for your understanding that Jason is attending over Zoom.

Today’s announcement is live broadcast over the Internet.

Now, I would like to invite Yoshimitsu Goto to present you the earnings results and business overview. Mr. Goto, please.

Yoshimitsu Goto

Well, good afternoon, everyone. Thank you very much for joining our earnings results announcement today.

Let me start our explanation on the earnings results for the first three months period for 2024. This is the first page. The first quarter, so this is the end of June number that we are sharing with you. So you see that this is a market status. Up until the end of June, that was the market. However, after this, we had a big volatility in the market, and this is the current situation.

So, you can see on your far left, at the end of September last year, which was the timing of Arm IPO, so starting as then in share price and the SPG share price and also some KPI — indexes that we try to compare those movements, you can see that the day before yesterday there was a big declines in Nikkei, since the Black Monday and yesterday was the biggest record high increase in share price of Nikkei.

So Black Monday, if you recall, 1987, October 20th. On 1987, I graduated from college. And starting April, I start working at Yasuda Trust Bank. And then, I’m one of the survivor from Black Monday, and I believe people here may not have the business circumstance. Many of the media’s related people, those young generations, if you see those three days in the past, I understand those are the headlines for the newspaper. But for me, because I experienced Black Monday, I have a bit different angle because in the past 40 years market structure or instruments, products that are traded in the market or the payment speed, settlement speed or the size of the payments or size of the settlement has dramatically changed since then, along with the technology development. Financial engineering has also developed over the time.

So, if you only see the numbers of the decline, then you may be very surprised, but it’s not only that, I believe there are many reasons for the decline, and I think that we do need to analyze the marketing environment and based on that, I believe that, that was the reason why for the declines on the day before yesterday and the increase in the yesterday so that we’ll be able to see the future.

Under such circumstance, what kind of framework each respective company should be prepared and what the SoftBank have been preparing for? Our business model, I believe, is one of the most unique business model. We are investment company. We are a strategic investment company, but at the same time, we are also exploring the challenges in the aim of the AI era to come and we do need to see the both sides.

Our business model itself does have a very affluent assets and those assets in principle are businesses or companies who will be able to take an advantage of the AI era or ASI era to come as our Chairman, CEO, Masa-son, mentioned at the AGM in June this year. Also, those companies with many new ideas, that is going to be in our group. Sometimes that we raised them from the scratch. So, there are a variety of the angles that we are looking at.

So, while we’re monetizing and also raising those assets, grow the business, but also we have shareholders’ returns, financial improvements, those are very strong financial status and as a result, we will be able to improve our balance sheet. And those, as a result, be able to provide us the room for leveraging debt capacity so that can be utilized for the bridge of that — for it to fill, the time lag between investment and divestments. And the important thing is — so ons and offs or the gas and break those are something that we can completely manageable by the company.

So more simply put, investment, if we invest, we need money; if we don’t invest, we don’t need money. So, we can manage to do investment or do not do the investments. And also, we can decide how far we would like to utilize our balance sheet and our credits and also financing possibilities with partners of the concerned parties. There are many experience that we have. And most important thing is that we can be flexible based on the changes of the market and the environment and that’s our kind of uniqueness of our company.

Page 6, key indicators. This is to remind you once again that the net asset value, of course, varies based on the market status, it goes up and goes down. Six months ago, at the end of December, our net asset value was JPY19 trillion. In six months, it became doubled to JPY35 trillion. In the past few weeks, what’s happening here actually pushing our net asset value down to JPY25 trillion. So, in several months, that the value is varies, which is big volatility, but at the same time, if you put it into our loan to value as a key performance indicator for our balance sheet, even now, it’s still about 10.9% level, which is extremely safe level.

So, from the end of June to today JPY10 trillion net asset value decrease, but still the safetiness unchanged in material way. Of course, cash position, if you don’t spend it, we can maintain so that we are having the same level, there from JPY4.6 trillion to JPY4.3 trillion, this is only from the foreign currency changes. So, I understand that there are kind of possibility of moving around the figures based on the volatilities and every time of the earnings, what I am keep telling is that we are not focused on the short-term volatilities, but the important thing is that what we are convinced in business models and the target is going to be consistent and be prepared for that. So here, once again, that I wanted to communicate to you that the safetiness of our balance sheet.

So, we do have a very robust stability and based on the very — this such stability, we would like to strive for the ASI realization. So such a robust stability is something that we prepare. Indeed Masa and also our teams is exploring the best way for the ASI to come.

And this is a three months highlights for the first quarter period, as I mentioned earlier, or that you may be seeing — sorry, from the news flash that the net loss, net loss, that’s the kind of words that I’ve been seeing on the news flash, but we do have an investment gain of JPY559.7 billion, despite — as of the end of June this year, net asset value achieved a record high. We will continuously pursuing the realization of ASI through the strategic AI investments. And for that Arm is very important. And fortunately, Arm performance continues very well. And Vision Fund has also turned positive from the performance point of view. And loan-to-value and the cash positions, the financial policy, we will be keeping this policy. And also we do keep the good balance sheet to be able to be agile in terms of the new opportunities.

Consolidated results. Quarter-on-quarter, you see the positive numbers here. Net income is negative JPY174 billion, but quarter-on-quarter, it has increased by JPY303 billion, mainly contributed by the foreign exchange. In positive point-wise, investment gain, JPY559 billion of the positive figure recorded. So quarter-on-quarter, JPY1.2 trillion of the increase.

Investment and net income gain or loss. Orange lines gain or loss on investment, you see the steady increase. Net income, of course, this has ups and downs because of the variety of the reasons, especially net income negative and positive investment. This is the first quarter, which has the biggest discrepancy and I think that the mainly this is also coming from the foreign exchange. Gain and loss on investments from which investments that we are seeing the gain. And here, as a holding company, we do have our investments and also investments from Vision Fund, both of them are in positive this quarter. In the past, one side is positive, the other side is negative, but this quarter, finally, we see both positive.

Now let me share with you key indicators: NAV, LTV and cash position as of end of June. Net asset value, JPY35 trillion most lately about JPY25 trillion, JPY10 trillion down, but we will see how it goes in the market. LTV, very safe level. As I mentioned at the last earnings call, less than 10%. From investment company perspective, may mean we don’t do a good job. But again, LTV is a very safe level and we have plenty of cash.

With regards to the net asset value, recently, we saw a JPY10 trillion down. If you go down deeper, I mentioned that it was in 1987 when I joined the bank. After graduation, I majored in history in Industry and maybe I didn’t know why ended up working in financial business. But again, as you can see, since 2000, what happened? In the era of 2000, there was a so-called net bubble or dotcom bubble. Back then, far left in this chart, you see a small hill, but back then, we thought the hill looked like a mountain. But now we are seeing similar ups and downs. I think there are similarities in the year of 2000 and now.

So, what drove the increase and decrease in the year of 2000? How much powerful the Internet was? And how much value that Internet could create? People are watching the upside of the Internet and the capability of the Internet and then the value went up. But now looking at AI, I think investors and people are looking at the trends in a similar angle. I sometimes mentioned technology advances and once technology advances, technology would not go back. So, technology advancement would lead to added value. We don’t know how long it takes before the added value is delivered. But definitely, advancement of technology should create added value.

Looking at the far right of the chart, if 2024 was on the far left of the chart and in 20 years’ time, I think that we will see the similar picture. I experienced a tough time since the Black Monday and also I experienced the so-called Lehman shock. And the reasons were clear back then, the valuation was long and the valuation was created artificially. That was when Black Monday happened, and when Lehman shock happened. So, compared to those two big events, the Internet dotcom bubble in the year 2000 and historic decline of the market that we are looking at recently, the situation is not bad actually from the history perspective. On Black Monday, traders were using fingers and hands for transaction and trading, but now it’s a completely different picture. Anyway, my message is our market moves in a very short period of time, and we have to take into account when we see the market.

ForEx. JPY10 move was seen in the last three months. What impact this could have on our value? Is it positive or negative? Weaker yen actually is a positive. Why? Because as an investment company, asset or asset value is centered around the dollar, so weaker yen had a positive impact on net NAV JPY2.1 trillion. From accounting perspective, positive impact on equity but negative impact on consolidated net income. By the way, if you look at a very gray number, JPY144.98, which was as of yesterday, so yen got strengthened as much as JPY15 in very short of a time. If you have plus JPY15, it could mean JPY600 billion of a positive. So anyway, so ForEx move has an impact on PL and equity and NAV.

Loan-to-value, lowest leverage ever or the safety level is the highest. So maybe we have to do more doing our job. Cash position maintained high level, about JPY4.3 trillion. This chart shows a change in composition of assets held. We have been decreasing Alibaba’s position for some time. And we had over 51% of Alibaba four years ago, but now we have over 50% of Arm as of June end. So that shows how we are positioned against AI.

And change in regional composition is shown here. Four years ago, we were concentrated on China, namely Alibaba, but now we are looking at Europe more than any other region. So, we mitigated risk of China-centric position.

And liquidity is shown or presented as a percentage of listed shares in our portfolio as of end of June, over 80%. Every year, share of listed share had been going down for three years. But in the meantime, we sold down Alibaba’s position, and we have gained cash, which is safe. But for investors who are concerned about percentage of listed share, I believe that they are happier now looking at the current percentage.

And here on, we would like to explain you about our initiative to realize ASI. Back in June, Masa shared his thoughts at the General Shareholders’ Meeting. And here, once again, to confirm, this is his kind of comments, not me, at quite a big mission as a group that we are driving evolutions of humanity. And that’s why we would like to realize ASI to fulfill our mission.

And to realize that, we would like to drive forward with group-wide efforts. In these efforts, especially, we would like to focus on those three areas: AI Chip, which is going to be even more developing, AI Arm to be leading that; AI Datacenter is also essential to develop AI; and how the AI can be helpful in people’s life and probably the most easiest to see is robots. So those are the main focus for — as an group for the AI.

In SoftBank Group, as I mentioned in the very beginning of this presentation, I believe it’s very unique company. This is really difficult to find the peers or the similar company. When we have a dialogue with investors, I believe this is one of the agenda because I often asked the questions like how can we compare with — if you would like to compare with somebody who will be the company that you pick up? But really, I cannot really think of any company that’s comparable to our business or the business model, which makes us very unique.

And the cluster of #1 strategy is something that Masa have been explaining to you. And in this current status, this group strategy still applied. So not — we are not the group only with the capital or partnership, but we have business partnerships or the sharing the visions or the missions. So, there are many relationships, partnerships that we try to grasp for our efforts so that we can create the organical connections with those people.

If you look into one by one for the more specific companies, these are the companies that we start — we’ve been investing with this ASI aim. Graphcore is one of the company. They are specialists at designing, developing and commercializing chip for AI and machine learning, especially engineers resources are very much rich in this company. So, we are very happy to be able to have them in our group to have several potential collaborations and partnership with such company.

In SB Energy, in United States, mainly in the United States, they are pursuing renewable energy platforms. And they are already in operations, which is 2 gigawatts, and in construction of 1 gigawatt, and also they are expanding. So currently, it’s only solar power but also exploring the optionalities of the energy source.

In Japan, our energy business has been sold last year. But in United States, we would like to maintain this agenda with this company. And for SoftBank Corp., this is one of the good examples for our efforts for ASI. SoftBank Corp. as a telecommunication operator is mainly leading this data center business. Hokkaido and also Osaka-Sakai plant by Sharp has already been announced and utilizing those in a variety of the places in Japan or the focus area AI base is allocated. And we also like to be the lead for the AI data center business and so that we’ll be able to accumulate our know-how and expertise.

Robots: There are several investments that we have done and being announced and shared with you at the earnings results announcement occasion. If you look back 10 years ago, 2014, Pepper was launched. Pepper is now not only in Japan, but also in the worldwide. He is — he or she, the Pepper is working hard. And I sometimes surprise to bump into Pepper in a very unexpected place. And Pepper is also evolving. But not only that, we have some areas such as cleaning robots or serving robots being also the area that the SoftBank robotics are working on. And I think that you’ve been seeing these robots these days. If I go golf course that happened to see the serving robots at the restaurants or cleaning robots and I start seeing them more often.

When the time is ready, that I also like to share the market shares of those products and so on when — but I think they are doing pretty good in shares as well. And now that we’ve been seeing logistics automations or AI robots or the autonomous driving, those are the kind of a path that we are looking at from the SoftBank Group’s robotics business. More specifically, these are the investees for the robotics business, Balyo, Symbotics, GreenBox GB, AutoStore, Berkshire Grey, so distribution solutions, warehouse solutions that we are partnering, working together to develop the business further.

We made an announcement on TEMPUS and press conference was led by Mr. Son. Please take a look at the video first.

[Video Presentation]

Yoshimitsu Goto

As you can see on the slide, in the United States, TEMPUS as a partner network of 2,000 hospitals and they’ve got 7.7 million number of cancer records in the U.S. Imaging data, sample sequences and DNA and RNA data, they’ve got plenty of data. And of course, they expanded data set so that they can build a leading AI-enabled diagnostic platform in the world. It’s still progressing. And there are opportunities for them to play a key role. They have three product offerings: Genomic Testing, Medical Data Aggregation & Analysis, and AI Insights and Therapy Selection. And people in the medical field are working so hard and I believe that this kind of technology help them to reduce the workload and work time and the TEMPUS business should play a key role in that process. And we established a joint company, SB TEMPUS. SoftBank Group, while investing in TEMPUS AI also invested in SB TEMPUS, likewise, TEMPUS invested in SB TEMPUS. And they will start in full operation as of August 1 — they started full scale operations as of August 1.

And looking at the numbers, invested amount for the first quarter was about JPY1.9 trillion, significant increase from the past two quarters. Looking back to history, usually, Q1 had a heavy investment quarter because some deals were done earlier than planned until the March and numbers were revealed in April and onwards. In any case, we have been building investments in a steady manner.

Talking about the divestment and monetization, we continued capital recycling. For T-Mobile shares, 6.7 million of T-Mobile shares sold to Deutsche Telekom for monetization. And also all interest in Fortress sales were sold to Mubadala Group. And also, likewise, SoftBank Vision Fund sold investments, including SenseTime and Paytm, for the purpose of monetization. So all in all, about JPY400 billion was monetized in FY ’24, quarter one.

Let me talk about Arm now. First, our revenue continues a record high. In fact, above analyst consensus of $903 million. Operating income up 65% year-on-year at $448 million. The other day, when Arm announced their financial results, they shared a guidance. Revenue for the second quarter guidance is $780 million to $830 million. For the full year, our guidance stayed the same from a conservative perspective. Arm is growing steadily and in healthy manner. And Mr. Son has been figuring out growth strategy for Arm and he places Arm at the center of the group strategy. And going forward, we want to make sure that we grow Arm as a business to deliver specific cash flow and at right timing, I believe that Arm will be appreciated and evaluated accordingly.

In the last quarter, Microsoft announced in May, Copilot+PCs for high AI performance integrating Arm-based chips was announced. And on this chart, if you take a look at the far left, Armv9 contribution. Royalty revenue is very predictable, steady revenue that can be expected and Armv9-based chips contributed 25% to the revenue. And also 20 million developers accelerating software development on Arm. It was 15 million the last time we shared with you the number, now nearly 20 million developers are helping Arm’s growth. And major hyperscalers, the mega companies in the IT sector, 10 hyperscalers adopt Arm chip for their data center building and implementation. I believe that Arm will further grow for a long time.

Next is Vision Fund. So gain or loss on investment in a quarterly basis, it turned to positive this time. And gaining those cumulative gain and loss on investments you see either almost flat, and I believe we are on the path to the improvements. Vision Fund 1 and 2, if you breakdown, Vision Fund 1 for this quarter was very good, JPY2.8 trillion. Vision Fund 2, because the timing of the investment was relatively high in book value and also, we still haven’t spent enough time since the investments, so I believe that the Vision Fund 2 — Vision Fund 1 has recovered over time. So I believe that the Vision Fund 2 will also take some time, including some new investments that we would like to follow or the good path to the improvements. And the cumulative investment return, $89.5 billion other investment cost and now it’s cumulative investment return $109.1 billion. Vision Fund 2 investment cost, $53 billion. Cumulative investment returned $31.1 billion. So, we would like to make sure to fulfill the discrepancy here.

In the investees or the portfolio companies status, this quarter, we had one, XtalPi went public this quarter. And other than that, mainly late-stage the portfolio companies are good in terms of possibilities in becoming a public company, and we are very excited to see those.

And these are the good examples of the investments that the Vision Fund made recently — Vision Fund 2 made. Since that very tough time last year that we have shifted to the offense mode again. And we are back to the investment mode. But at the same time, we are very selective and also very careful in discussion at the investment committee to make sure that we are carefully selecting the investees from the Vision Fund 2.

Last, but not least, our financial strategy. Past three months rating has been very positive for our companies. Of course, we took some time to come this way, but JCR first upgrade in 12 years, S&P. There are some discussions that I also shared with you in our earnings result announcement, but a year ago because of the listed shares — listed asset shares was the reason to downgrade it, but this were recovered and back upgraded in just one year.

Many changes happening, but our financial policy never change. So, this is the most highest priority. And while keeping this financial policy, then that we’ll be able to keep investments amount and our strategy, too. And equity markets, credit market, wholesale, retail, in the varieties of the aspects, we also like to make sure that we can build and keep the good relationship with those investors. And for that, Investor Relations will be also — we will make an effort in investment relation activities. So once again, no change in our financial policy, financial strategy for fiscal 2024.

Today, we also announced our share buyback. Of course, there are many agenda to discuss for this matter, but at our Board, there are enough discussion made and we believe this is the time to and we were able to choose the best timing to decide this. This time, we decided JPY500 billion or by one year to execute. In what way and how we — to purchase is our discretion.

Once again, the first quarter summary. As you can see from the number one to number six, I believe I were able to cover this agenda in our presentation. Of course, market is tough, but our financial status is very robust and stable and our aim ASI that we would like to bring it happen as early as possible so that we’ll be able to provide, we would like to support providing ASI services and at the same time, we would like to lead such a movement as a SoftBank Group.

That concludes my presentation for today. Thank you very much.

Question-and-Answer Session

Operator

Now, we’d like to take questions. First, we’d like to take questions from the floor. [Operator Instructions] First, from the floor.

Unidentified Analyst

[indiscernible]. Two questions. Looking at the latest market condition, you mentioned that your financial policy remains the same. But I wonder if it could have an impact on your investment policy? NAV goes down a little bit, are you going to be more cautious or careful? And the share price go down, and that could be an opportunity for you to make an investment. Would you like to accelerate the pace of the investment? What’s your view in terms of the market condition versus the impact on your policy?

And the second question, Goto-san mentioned that the IT bubble in 2000 and recent situation are similar and you mentioned that the situation is not bad. Could you elaborate on that compared to the Lehman shock and Black Monday? Because you have high expectations to AI, for example, that is more real, is that why you mentioned that this situation is not bad? So again, if you could elaborate on your view, when you mentioned the situation right now is not bad?

Yoshimitsu Goto

Thank you very much for your question. The first question, well, the day before yesterday, the biggest dip in history and the yesterday biggest rise in history, the market is so volatile, and we are, of course, cautious. How the market reacts could lead to valuation when it comes to new investment. I think, in a sense, maybe we should be protective and conservative. But in general, I think, it’s a good opportunity for investment, in general.

For example, we have JPY4.3 trillion of cash position, people asking, how are you going to use the cash position? We have JPY4.3 trillion on our balance sheet, which means we have a very healthy financial position. So we already have such a financial healthiness. When you make investment, the healthiness gets worsened, but we need to figure out the best balance. We want to make a new investment. And also, we want to focus on return to our shareholders.

We made announcement of the share buyback, for example, because we thought now is a good time. When the market trend is downward that could have — that could pose an opportunity for investment. But again, since the market is so volatile, we have to be careful. But in general, a good opportunity for new investment in general term.

To your next question. So, I don’t want to elaborate too much on what I said, but when the dotcom bubble was bursted, the leading companies back then were Amazon, Microsoft and Google that emerged later. In fact, those companies are the top 10 in terms of market cap. Now back then, we didn’t really appreciate their value in the year 2000. Something was unclear, but we had a high expectation to the Internet, but we didn’t know exactly how much added value the Internet could create. Let’s say, we have property and how much the property cost.

There was a truly bubble. And when it comes to speculative investment, there is a value for sure, but in the era of bubble and in the era of evaluation for the future opportunity, there might be differences between those days.

Operator

Well, next question long-sleeve white-shirt person, please.

Minoru Satake

My name is Minoru Satake from Nikkei Newspaper. I have two questions, please. First, current equity and credit volatility globally, what do you think is happening? That’s something I would like to ask you. And also your financing, does it going to be impacted? I believe that you are raising in yen and investing in overseas. But the rates, loan or refinancing, bond issuance will you continuously address those?

My second question is about buyback. Is this — I believe that Masa referred to [indiscernible] discount, but is this because of the too much discount? Is this something that triggers to come to this end? And also share price sharp decline, was that the main reason for your buyback execution?

Yoshimitsu Goto

So market volatility, the reason I believe there are many scholars in the world. So maybe I can only see those, read those academic people also explaining analyzing. But sometimes I may not sure that those are — that, for example, the employments carry trade, there are many aspects can be a reason for that. But in the past two days, volatility, may not be only the reasons. We cannot really calculate that. And there are speculations or — in the past six months of the market movements and investors, what kind of activity they should be doing. And that judgment has been amplified, and that’s somehow that I see the current situation.

For financing, at this moment, we don’t really see any big change. We’ve been following the credit market and looking at the secondary market and the CDS, but I haven’t seen any material issues or material situations for those market. If you see credit point of view, our healthiness or soundness of the balance sheet is the most important and that actually hasn’t really changed. Our soundness of balance sheet has not really changed, even we see such a market volatility. And for the credit investors or analysts and myself, I believe we are on the same page from that understanding.

What was your second question, once again, sorry? Buyback. For the decision on buyback, there are many agendas when it comes to buyback. Like you said, net asset value discount is one aspect. Share price itself is also one agenda. Environment, when it moves dramatically, how it goes, it can be — in the past few weeks ago, our share price was like JPY10,000 and all of the sudden, went down to JPY6,000. And how they’re going to move? It’s not a logical figures for our share price, but market itself is actually overshooting or down shooting and goes ups and downs. Sometimes it declines continuously, sometimes, it’s not.

So whenever we have such a worst-case scenario, then we decide what can we do for the stakeholders. And we do — I believe that, that needs to be communicated to the market. What is the preparations? What is the framework that we are preparing for? But at the same time in the previous question, that can be a good opportunity for investment as well. And if this confusion even goes further, then the even more important thing is our balance sheet soundness. So, we would like to take a good balance in between those two and decide on this JPY500 billion of the buyback. Of course, return to shareholders is one agenda for us as well. So the answer is not one answer. There are many kind of agenda and come to this conclusion of announcing this buyback program.

Minoru Satake

And it was Elliott, come to your thoughts on the buyback decision?

Yoshimitsu Goto

Investor, Elliott, you mean? I don’t discuss any specific communication with specific investors. Important thing is our decision is made by ourselves. That’s all.

Operator

And the next question from the floor.

Unidentified Analyst

[MJ] (ph) from The Bloomberg. Again, about the buyback. So communication with Elliott or opinion of Elliott did not have an impact on your decision of the share buyback, again? Just to ask you again.

Yoshimitsu Goto

Like I said, I don’t discuss with you about a specific dialogue with a specific investor. And let me reiterate. For this decision of share buyback, we have made our own decision after discussion at the Board level. So, we are not a company that has made a decision after impact from somebody else.

Unidentified Analyst

And then the question, the first quarter’s investment went up so much compared to the previous fiscal year — sorry, first quarter. So again, for the full year, the Group and Vision Fund, could you have a comment from the Group Goto-san and Vision Fund from Navneet maybe, how much investment are you planning for the full year?

Yoshimitsu Goto

We don’t have budget for full year when it comes to investment. When we discover a new opportunity, we make investment. That’s how simple it is.

Unidentified Analyst

And how much what makes — what decides the amount of investment?

Yoshimitsu Goto

We have a finance position, of course, our loan to value, our cash position. Those are key indicators need to be maintained. First, that’s the highest priority, then that could lead to investment capacity that have. In 2022-2023, about JPY3 billion investment was made, respectively. From our experience perspective, this kind of a speed of investment could be the base. But if we find more opportunities, we have a good capacity for investment. So, we will see whether those good opportunities will emerge.

Unidentified Analyst

Thank you.

Operator

Any other questions? The person in the front row.

Unidentified Analyst

[Narabe from Asahi Newspaper] (ph). So the previous question — may be similar to the earlier question, few days ago, Intel was shocked, was called in U.S. equity market, Intel share price declined by 20%-or-so. That was — that came along with the headcount reduction and also the delay in the semiconductor. Those are the kind of people’s expectations, not only Intel, but other semiconductor names are declining same as Arm. Under such an environment, I mean, how do you see such a situation? Is it AI bubble or semiconductor investment or the NVIDIA itself, may be bubble? Those — there are people saying that, too. And how do you see that situation and would that be impacting to your investment strategy? Would you please answer those?

Yoshimitsu Goto

Intel shock. There are many people saying about the reasons why or what. I read those, too. And also in the past few weeks NVIDIA and many names, semiconductor names. In Japan in overseas, showing some declines, and there are many insights and each irrespective insights has good reason, but the movement was large and sudden. And in the past six months, I believe they have increased so that there are room to decline as well. And the increase was probably because of positive valuation accumulated in the past six months that built such a movement in share price. And maybe right now is a kind of a timing to revisit the valuations of those.

Of course, in the past six months, the market judges those valuations, and now that the people start revisiting a little bit critical ways or checking whether that’s real variations. Of course, we are supporting AI, and we are believe for AI to be changing people’s lifestyles and we are very much believe that too that the AI is going to be changed. Of course, that the timelines are a bit different. We — timeline may be needed longer than we expected. And in the meantime market, like a Internet bubble to year 2000 has some kind of volatility there and the same good things could happen. So, we have kind of a very sound balance sheet and company so that we can take time to look at those movements, we don’t want to do any extreme things when the situation is volatile.

Operator

Thank you. Any other questions from the floor?

Unidentified Analyst

Thank you. [indiscernible] I have one question about the share buyback. Sorry to ask you again about the share buyback. Going forward, do you have a plan to increase the volume? And what kind of discussion was made at the Board level?

Yoshimitsu Goto

So this amount or the size was also discussed at the Board of Directors meeting. That was the main — one of the main agenda, and we have a good discussion there, and we come to the conclusion to come to this size. Not increasing from here, but we may consider a new program when necessary. This time, we come to this conclusion. But in the Board of Directors meeting, we always are keeping return to shareholders as a very important agenda to discuss. We’ve been continuously discussing that. And this time, although this happens while last time was a bit a while ago, but still that every Board of Directors meeting, we always have in this discussion.

Operator

Thank you very much. Any other questions from the floor? If not, now we’d like to take questions from the Zoom participants. [Operator Instructions] First, [Nagoshi-san] (ph) from NHK.

Unidentified Analyst

Can you hear me?

Yoshimitsu Goto

Yes, we can.

Unidentified Analyst

Again, my name is Nagoshi from NHK. I have two questions, maybe similar questions. In 2017, SoftBank Vision Fund was established and you transferred from a mobile business to investment business it’s been several years. You have been focusing on investment in AI. And what’s the performance? Where should I look if you want to see the performance of your investment in AI sector? That’s the first question.

And second, ASI. You often talk about ASI. ASI is not materialized yet. And also, you mentioned Internet bubble in 2000, and there were Google and Microsoft back then as well as now. Now NVIDIA, OpenAI, Google are leading the ASI or AI sector, so what kind of role that SoftBank Group wants to play in the era of ASI? If you could elaborate on that, please? Thank you.

Yoshimitsu Goto

Yes, Vision Fund started in 2017, and you asked about the performance, investment and performance, of course, you want to see the performance because it’s a fund business. At the time of 2017, the AI world back then and the AI world that we are seeing now is very different. Vision Fund, Arm in 2024 and SoftBank Group in 2024. Through the Vision Fund, we have been trying to future markets. We have been working hard to make investments for the future, and we have been building our expertise through the course. In that journey, we had seen ups and downs. But the investment in AI has just started and failure investment isn’t a good experience. So we want to take it as an asset so that we can leverage the expertise that we have built for our future investment. And the expertise that we have built is the biggest asset that we have.

And what was the second question, again, sorry?

Unidentified Analyst

ASI.

Yoshimitsu Goto

Yes, ASI. The concept of ASI — of course, Mr. Son and us have been talking about the concept of ASI, I’m not an engineer background and I a finance guy, so I am learning ASI. In fact, we are all in the learning process. Who could be the leader of ASI? Nobody knows. Some potential leaders are there including the names that you mentioned, those companies should be able to lead ASI and communication with the management team of those companies should help us to learn more. And Masa, in fact, mentioned at the AGM, he talks with Sam of OpenAI and leaders of the hyperscalers. He has been talking with those leaders. And again, we’re still in the learning process. But at the same time, we have a chance, we had opportunity for try and error. We can accept some risks because we are still at an early stage. So in that process, we’ll see what we should do to capture the potential of ASI?

Unidentified Analyst

If I may ask you a follow-up question. You talked about Graphcore in your presentation and I’m sure that you have Arm leading your business. You acquired Graphcore, but for ASI, you put semiconductor at the center?

Yoshimitsu Goto

For ASI or AI itself, when you think about AI, the heart of AI definitely is the chip and the semiconductor and chip and Arm is the leader, absolute leader of the market in terms of chipset and the brain of the AI. So naturally, Arm plays a key role in our AI strategy.

Operator

Thank you. Now next question from Mr. Masuno from Nomura Securities, please.

Daisaku Masuno

Yes, this is Masuno speaking. One question. On Graphcore acquisition. Objective of this acquisition, I have only read the newspaper article and the Microsoft who didn’t use, so that has to reduce the headcount and so on. And I believe securing the headcounts because do have an engineer, but excluding Arm, SoftBank side does not have enough engineer. So I thought that you tried to lock-in those number of engineers by — through the acquisition of Graphcore. Only reading the articles, those employees of Graphcore lost stock options. And I wonder that can you retain those employees. So retentions of the employees, how you collaborate with engineer that I wanted to hear your objective of the acquisition of Graphcore, investment in Graphcore?

Yoshimitsu Goto

So as I mentioned earlier, Graphcore in AI development we do require lots of resources with expertise on this area. But not only the Graphcore, but we do a lot of M&A transactions with many companies in the past, people is the most important thing. So, when we acquire or we invest in any company, having such resources, having such people is the main reasons for the investments. You mentioned about some articles, but that’s there and we would like to make sure we have a good technology and also people who support this technology. That was the main objective for such transaction.

Daisaku Masuno

So at the AGM, Masa said, he found the missing piece. Is this Graphcore — does he refer to Graphcore?

Yoshimitsu Goto

That we have to ask Masa.

Daisaku Masuno

Okay. Understood. Thank you very much.

Operator

Thank you. The next question is from [Mr. Hyuga] (ph), Bloomberg.

Unidentified Analyst

Can you hear me?

Yoshimitsu Goto

Yes.

Unidentified Analyst

Thank you. The earnings result of the first quarter bottom-line was negative. But for the full year, negative numbers for three consecutive quarters. But you posted a net loss for the first quarter. I understand your explanation of NAV, but for general investors, whether a company makes a loss or gain are very important for general investors, including retail investors. So, what’s your view on the net loss you posted for the first quarter? And second quarter, can we expect gain as opposed to loss?

Yoshimitsu Goto

Thank you for your question. We communicate with investors and how I feel — how we feel by communicating with investors is as follows: Investors view net asset value as the most important KPI. Of course, profit is important and ups and downs of profit is the measurement for decision for the investment. I think, they are looking at a net asset value as a tool for the making a judgment of the investment as opposed to net gain.

For the current quarter, I cannot make any comment on our expectation of the net income. Of course, there is something that we can control and there’s something we cannot control, for example, ForEx. We know that there are different opinions, but again, I cannot make any comment on the expected income or loss for the quarter.

Unidentified Analyst

Related question, when you turn a positive, would you — do you want to emphasize the positive number? But when it comes to negative numbers, you may want to — you may touch upon share buyback, for example. You mentioned net asset value is very important KPI, but without share buyback, I assume that you might make a different move for investment without a share buyback. It’s difficult for us to understand your performance. So, in order for us to — or help us to understand your performance positive or negative as the bottom-line is, I think, very important. So again, for the outlook for the current quarter, there are other uncertainties, so you may not be able to say in exact numbers, but direction-wise, I understand your quality is good, there are investors with different asset classes. So again, could you show us direction about our expected earnings results?

Yoshimitsu Goto

Like I said earlier, I cannot make any comment on expected bottom-line outlook. We don’t disclose outlook because we know that our bottom line changes depending on the market condition and other conditions. That’s why we don’t disclose the guidance. And whether positive or negative, I’m sure that there are people in terms of in positive or negative, but again, our investors, I believe when you see success as an investment company, I believe that our investors are looking at NAV to see whether we are successful or not. And I hope that I answered to your question.

Unidentified Analyst

Thank you. Just to follow up. Looking at the IPO market, the market is very volatile and turmoil and very difficult to go IPO. In fact, IPO numbers are going down. So from the recoup of investment perspective or monetization of investment or exit from the investment perspective, what’s your outlook for this quarter?

Yoshimitsu Goto

Again, outlook, I cannot make a comment on the outlook. Sorry about that.

Operator

Thank you. For the interest of time, this was the last question for this meeting. Thank you very much. This concludes the SoftBank Group Corp. earnings results announcement for three months period ended June 30, 2024. Thank you. Thank you, again. The video footage of this meeting will be distributed on demand from our corporate website. Thank you very much once again for joining SoftBank Group Corporate earnings results announcement for three months period ended June 30, 2024.