SoftBank Group Corp. (9984) Earnings Call Transcript & Summary

[Interpreted] Thank you very much for waiting, everyone. Now we would like to start the SoftBank Group Corp. Earnings Results Briefing for the 3-month period ended June 30, 2023. First of all, I would like to introduce today's participants. From left, we have Yoshimitsu Goto, Board Director and CFO; Kazuko Kimiwada, Senior Vice President and Head of Accounting Unit; Navneet Govil, CFO, ASP Investment Advisers and CFO, Member of the Executive Committee, SP Global Advisors. Today's briefing is live broadcast over the Internet. Now I would like to invite Mr. Goto, board Director and CFO, to present you the earnings results and business overview. Mr. Goto, please.

Well, thank you very much for your attendance for today's meeting. My name is Goto, CFO of SoftBank Group Corp. So I would like to present you the earnings results for the first quarter. First of all, I would like to touch on the market status to begin with. As an investment company, what we need to be keen on is the market environment and also the economical environment. At the same time, we also need to see the geopolitical situations, global situations. Those kind of thing is something that we always need to be keen. And starting for this April to June period, we've been very careful to watch all those important factors. At the previous earnings announcement, I said market is showing the recovering trend sign, but at the same time also, there are still several considerations which we do not see the clear solutions for. So that we do need to still keep on being very alert and careful. But at the same time, also we would like to take a lead before all the movements occur. So -- but at the same time to be selectively that we would like to consider the investment activities. And looking at the equity market, in the last 3 months actually showing a very good trend. And as you see on the graph, on the top of this graph is Thomson Reuters Venture Capital Index. So private equities KPI is also showing a very good trend in the past 3 months. At the same time, the public securities is also showing a good sign, too. In the Golden Dragon China, the Chinese markets KPI, looking at the January to March, we were a bit concerned, but now for the April to June period, showing a good recovery trend. But when you go a little bit more deeper, especially the public securities in United States, we believe Magnificent 7, so-called, which used to be called GAFA, those large logos: Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, Tesla, those 7 major companies, large companies, our share price is actually making a big -- becoming a big driver for the recovery of the market. Of course, there are some other positive factors as well for this recovery. And for us, looking at the public securities movement in the past 3 months, actually, the number has been showing a very positively. NASDAQ -- compared with NASDAQ, we believe that our trend is becoming very similar to NASDAQ these days. And looking at the current status of the market and the Vision Fund progress. Looking at the past few periods, actually we returned to profit for the first time in 6 quarters. This is one of the highlights for this earnings, I believe. This is the Vision Fund stand-alone basis. So it's not a consolidated base, so that there's positive figures showing here on your right, USD 975 million. As a result, to the cumulative gain/loss on investments, this again is the first turnaround in 6 quarters. So now you see that the trend has turnaround. So based on this trend, we also like to make a good balance in between gas and brake for the reinvestment activities. So June -- April to June quarter, Vision Fund investments and also investment from SBG, in total, it was about USD 1.8 billion of the investments has been executed since we made a little bit of -- we made an announcement on shifting to offense mode. Last year, whole year was almost stopped in terms of investing. So when you look at the 3-year trend, we've been carefully restarting our investment activities. I hope you get that kind of a sensitivity here, that we are carefully and slowly moving back to the investment activities. The investments that we have done so far has been selectively considered and, at the same time, keep focusing on the AI trend and for the future growth that we would like to start having a good relationship with those companies that we -- for the future of the group. Back in June when we had our shareholders' meeting, our Chairman and CEO, Masa, came back to the stage and talked about shifting to offense mode. I believe we actually are shifting to the offense mode but, at the same time, from CEO's point of view, we would like to be carefully and selectively -- when it comes to shifting the offense mode, our baseball team, HAWKS, also needs to be back to offense mode. We've been having a bit of difficult games and challenging games these days. But baseball as well as the business needs to shift towards offense mode after we had a very challenging period in the past. With those understanding, let me share with you the consolidated results. First quarter consolidated results, as you see, net sales, as we are the investment holding company, so that JPY 1.5 billion (sic) [ JPY 1.5 trillion. ] More importantly, net income, minus JPY 477 billion. And also the loss on investments, when you see the change on your right, JPY 2.6 trillion of the net income improvements, but the loss on investments has improved by JPY 2.1 trillion. And this is compared to the market trend recovery, maybe we should be a little bit better than these numbers. But there are some reasons behind for those. And also the gain and loss on investments. This is the Vision Fund number. So this has been netted off for the consolidated base. So there are several companies, Arm and PayPay. This has been netted off from these numbers point of view. But still, they are coming back to almost back to the originals. And with that, gain and loss on investments minus JPY 699 billion. This is materially improved compared to the previous year. But when you look at the breakdown, out of the JPY 699 billion, of which JPY 550 billion is due to the loss on Alibaba, due to lower share price. And I wanted to recall that this monetization of Alibaba share has already been completed. However, we still keep on holding our shares. And because we have done the derivative transaction, which has already completed, this is kind of a forward transactions. Therefore, when share price goes down, derivative point of view, it is positive. So this derivative gain related to the shares is shown on the dotted line. JPY 769 billion is the derivative gain. Therefore, the accounting item wise, it's different. So that this still remains as a negative for the gain and loss on investments. But Alibaba, JPY 200 billion, is positive after net-net. So for the -- looking at the gain and loss on investments, actually, effectively we can say that our status is positive. That's something, that the real status of the company. And here is the income before income tax by segment. Here, showing the performance of the income before income tax. So investment business of holding companies, it's still minus JPY 394 billion, change-wise, JPY 100 billion -- difference is JPY 803 billion and the Vision Fund is contributing JPY 2.4 trillion positively. In the consolidated base, it was minus JPY 176 billion, and net income, JPY 477.6 billion, as I mentioned earlier in the previous page. And here, I want you to see the breakdown of that. And as a matter of fact, because of the weak yen, there are ForEx -- JPY 464.6 billion loss on foreign exchange. So this as well should be regarded in the gain and loss on investments. But here in net income, the ForEx impact has been shown here. So this is actually comes up to the P&L. So as an investment holding company, weak yen, whether this is good things or bad things, actually this is very good, which I will cover that later pages. So as a result, net income, although that this is minus JPY 477 billion, however, the insights or the breakdown is coming from the P&L negative from the ForEx. Again, that I believe that effectively is almost breakeven. That's the kind of a real picture of SoftBank Group. There are very important key indicators for us as an investment company: net asset value, or NAV; loan-to-value, or LTV; and cash position. Compared to the end of March this year, in all indicators, we have seen improvement. For example, NAV increased from JPY 14.1 trillion to JPY 15.5 trillion; and LTV, 11% to 8%, cash position, almost JPY 6 trillion. So all 3 indicators improved. So we can be proud of saying that we are in a good position in terms of our financial basis. This slide shows a change in NAV. Main driver is ForEx. When yen is weaker, the value of asset goes up. So it's not a bad thing. Every quarter, we have announced financial results. And the share price, it's at plus JPY 0.4 trillion, which has been negative for a long time. And this term, we have seen the positive number of share price for the first time for a long time. Impact of ForEx in terms of P&L, minus JPY 0.5 trillion impact. But if you analyze further why it's negative impact, because borrowing in foreign exchange-denominated increases in terms of yen. And borrowing in foreign denominated currency, do we have a lot or not? For example, foreign currency-denominated bond is, of course, borrowing in foreign currency. And we have group companies, and we do exit, we do recoup. And when we get our contributions from group companies, there are a lot of intercompany loans in foreign-denominated currency. That's why we see the negative number, because borrowing in foreign currency-denominated, the value went down when yen is weaker. And in terms of net asset value, it has a positive impact of JPY 1.3 trillion. So again, weaker yen is good for us as an investment company. And this slide shows NAV per share and share price. This is also one of the important aspects that we should look at. And investors and analysts often say or often use the term SoftBank discount. And NAV per share, if you look at that, our share price is very weak or cheap because of the discount, people often think. As of end of March, the discount was 46%. But at this moment, thanks to increased share price and more than the increase of assets. So at the moment, we are looking at 36% of discount. So discount has improved. To what extent we should have it improved, of course, there are a lot of discussions and comparison. Pretax from a cash tax perspective, in theory it should not be 0. But for investors, we want to make efforts technically and essentially to improve this discount status. This slide shows equity value of holdings. The highlight here is Alibaba monetization, which we completed. And if you look at dark blue, second from the bottom, JPY 3.7 trillion in Q1 FY 2023, which indicates our value. So steadily, Arm has been adding value to its business. So all-in-all, equity value of holdings was JPY 16.9 trillion in the quarter. So it has been decreasing for a long time, but now we are beginning to see the turnaround. Since 1998, this graph shows a trend of net asset value. I joined SoftBank in 2000. So I have been in SoftBank for a almost whole time of this time horizon. And again, we are looking at upward trend, this quarter and the last quarter. Considering a possible IPO of Arm, we are expecting this to improve further and increase further. This slide shows trends of loan-to-value. Looking back to history, currently 8%, and this is the lowest in our history. Loan-to-value is low means we are safe. Is it good or bad? Well, people may say that you're not doing your job, you are too safe. But as an investment company, taking into account of our stance change from defense to offense, loan-to-value, of course, we have a strong role of financial policy. We want to make sure that we operate our business in a safe, disciplined manner. And to what extent we should allow loan-to-values fluctuation? There is no correct answer. We keep saying 25%, because 25% -- don't you think that 25% is safe from just a traditional perspective? Since we became an investment company, loan-to-value's average for the last 4 years is 15%. And looking forward, we make sure that we are running a business in a very safe manner from an LTV perspective. Now cash position. We believe that we have highest amount of cash position in our history, almost JPY 6 trillion. So those are key indicators, and also I touched upon P&L and balance sheet. And SoftBank Vision Fund. In the first quarter, total gain on investment was $1 billion. We have 3 boxes, if you will, in terms of Vision Fund. Vision Fund 1, which started first, and Vision Fund 2, which is ongoing. Vision Fund 1 investment was already completed. And SoftBank Vision Fund 2 are still making investment. SoftBank Vision Fund 1, we saw $1 billion positive. and Vision Fund 2, still negative, but all-in-all, combined $1 billion of gain on investment, positive number for the first time in 6 quarters. For Vision Fund 1, against about $90 billion of investment cost, returned $102 billion. You -- as you can see, orange part which is exited, has been getting bigger and bigger. They have some challenging time, but they're still making sure that they get returns. SoftBank Vision Fund 1 not only invest in public company, but also private companies as well, which include Arm. When Arm is listed and when its valuation is appreciated by the market, I believe that Arm will contribute to Vision Fund 1 a lot. There are a lot of companies that can be listed in the pipeline. And also we will support Vision Fund 1 and monitor Vision Fund 1 to make sure that the investment is surely monetized. Vision Fund 2, which started investment about 3 years ago, it's been going through a very challenging market conditions. Against $52 billion of investment cost, return is only $33 billion. But this fund is still young. And going forward, Vision Fund 2 will take a lead in future investments, and we will keep watching our fund performance to improve their operations. And this slide shows value changes in portfolio, which I'm sure you're familiar with, whether portfolio companies gained or lost their values. Left-hand side shows the status 3 months ago cumulatively. Unfortunately, however, the red pie which lost value was 346 companies. The number has been getting bigger and bigger from 100, 200 and 346 as of March 31. So the portfolio has been deteriorating. But if you look at the right-hand side, slightly the number of companies lost their value, got smaller from 346 to 343. And the companies who lost -- excuse me, gained value, the number increased from 101 to 112, slightly increased. Again, this is cumulative number. And if you look back further on the left-hand side, compared to the term from October through December, how the portfolio changed. 192 companies lost values, and 88 companies gained values. We saw a sign of improvement in the quarter from January through March. But if you look at the right-hand side, the number of company gained a value reached 150, and the company that lost value improved from 192 through 116. So again, we can say that we are beginning to see the churn of the trend. We will keep monitoring Vision Fund against the backdrop of challenging market conditions, and we can't be complacent. But for those portfolio companies, we are looking at a positive change, which I want to highlight here today. In quarter 1, invested amount was $0.9 billion in terms of Vision Fund. And Vision -- excuse me, SoftBank's stand-alone investment was $0.9 billion, so total $1.8 billion. So slightly we started accelerating investment. Visual Fund has close to 500 portfolio companies, and we would like to take an advantage of this network for our group management and also synergy -- positive synergy between those companies is also important. Navneet here is also making an effort to connect and arrange those portfolio companies each other. So Connect is one of the events that gathers the portfolio companies to networking and that having a dialogue between those companies, also inviting investment bankers or the -- our members to study is a good part about each other. That has been held sometimes. During the COVID period, it was done over Zoom. Also after then, that have been held at Paris or Japan and so on or India. And at the same time, we would like to encourage those portfolio companies to start entering into Japanese market. And we actually support those activities. Here, as you see that we've been enhancing ecosystem to -- for them to enter into Japanese market. Already 50 portfolios are start operating in Japanese market. Of course, this is just the beginning. We would like to see and expect a bigger success of such an activity and provide business opportunities to Japanese companies inside and also outside SoftBank Group, including SoftBank KK, which is the domestic telecom operator. But at the same time, they can be the big agent for the portfolio companies who are coming into Japanese market. So SoftBank KK has been playing a good role to kind of assist those companies to come into our market. Here shows the AI technology mapping that I would like to touch on a little bit. As we invest and also shifting to offense mode, we -- because we would like to kind of catch up the opportunities here. Of course, that the Vision Fund has done, start investing about 6 years ago. And actually, since then, that we've been very much focusing on AI. These days, that we see the very good trend and the popularities of the Generative AI and very much a trend. But the Generative AI is only the one part of -- one component of the overall AI. But there are other AI technologies, such as the natural language processing, deep learning, machine learning and so on. So I believe that we can break down into about 10 segments or 10 sectors for the AI technology. Here that I show, as one example of such AI technology use cases, starting from Frontier Tech to Enterprise, Consumer and so on. So Logistics, FinTech, is also included here, and EdTech is also one of the examples. And you see that the example of investees, for details of such companies, if you like to need to understand more, please contact Navneet here. But the Vision Fund has been already start to investing or start looking into not only Generative AI, but a variety, wide range of AI technology and being very selective to put the money into such companies. Next is, I would like to touch on a little bit about Arm here. I want to make a comment, however, because they are preparing for IPO. So I cannot really say anything. That's the comment I can say about Arm, I'm sorry about that. But for revenue, you see the numbers, $641 million, so year-on-year, a slight decrease. So short-term period, semiconductor industry is on a little bit of a down cycle. But if you see the past 3 years, the annual growth rate over the 3-year CAGR is 14%. And also the value of this company, actually, the real picture is going to be seen going forward. So that with the AI trend, they are the ones that are designing chip, and they have a very great track record for such businesses. And we believe that they will be valued in many areas, many sectors. I cannot touch on much of the value, that the legal has been told me, telling me that very strictly that I should not be talking too much about here. So that, I'd like to stop here. But what I can say is that their area that they are covering is even more expanding. So not only Arm that are working on chip, of course, the Intel used to design and produce. But I'm actually showing their capabilities starting from the mobile device, that they are having a great deal of market shares. And many people utilize such mobile device, smartphone to tablets, that it's being used inside. And those chips are very much close to designed chip. And when it comes to cloud compute, automotive, compared to 5 years ago that the chip for the cloud computer automobile is different, it's been changed automotive itself, that it's been evolving in autonomous drivings and so on. Cloud compute has also changed because Generative AI belongs to this area, so that Arm's capability can be truly taken in many more areas. So in our life, IoT is the one that we can see. Smart camera or the facial recognition, those are also done with latest-edge technology chip. So I believe that their chip is highly evaluated from the sense as everywhere that the Arm is being used. And one announcements that are done in May 2023 by Arm is the Computing Platform for Mobile. And Arm's latest-edge technology CPU has been built in. So for example, in gaming -- immersive gaming experience, which you have ever experienced before. That kind of technology has been also shared since then. And the latest GPU is also mounted. Therefore something that close to your life technology has been used by -- for the -- by the technology. And the next is the NVIDIA's announcement, that they have announced the Arm-based Supercomputer recently back in May 2023 and that they have adopted the latest chip. And through this Supercomputer, we believe that the medical and scientific research is going to be making a good progress, and also Europe's most energy-efficient systems according to NVIDIA. So this is also a great events that we have seen. And the Arm's IPO plan is going very smoothly. And today, I am not going to share the financial status or business progress of Arm from me. But once public filing is made, then I believe some information is going to be available so that I would like you to wait for that. And here, it's titled AI Reshapes the Industrial Landscape. Because there are some companies that we have invested in April to June quarter. And there are 3 companies that I would like to share with you today as an example. Basically, it's logistics-related and because AI is revolutionizing every industry, and actually, internet is basically the advertisement model from the business point of view. But advertising revenue is $0.3 trillion, but $1.8 trillion for logistics. So it's quite a difference of the logistic market size as a percentage of GDP in the United States. In Japan, a bit smaller size, but 1% advertisement, about 9% logistics, was quite similar to United States. And the AI actually redefine. So they have a capability of redefining all the sectors of the industry so that we believe that logistics can be redefined in many aspects. And we've been making some investments based on that hypothesis. And we've been -- we invested in those 3 companies: Symbotic, which was already invested by Vision Fund. And what we did was to establish a JV with SBG's investment commitment of $3.2 billion and acquired additional 3% interest for $500 million in July 2023. Also, we acquired all shares of Berkshire Grey. Vision Fund actually had interest of about 28% of this company, and we decided to privatize by acquiring all shares. And Telexistence, which is a Japanese company, we acquired a share through the JPY 23 billion round in March to June 2023. First, Symbotic. Let me briefly share with you what they do. Symbotic provides warehouse automation platform for retailers and the distributors. Let me share with you a video clip. [Presentation]

[Interpreted] So that was Symbotic. And they've got great growth potential. And they ran at 40-kilometer per hour. I think in a warehouse there's a regulation down to 4 kilometer per hour, because of safety concern. But if there is none, no person at all in the warehouse, the robot or cars can run as fast as 40 kilometer per hour. So that should help improving efficiency of the warehouse. Together with the Symbotic, we announced to establish a joint venture called GreenBox Systems, so that we can provide Warehouse-as-a-Service to varieties of customers. Next, Berkshire Grey. We have had a relationship with them for some time. And for logistic providers, they provide EC fulfillment, replenishment system and robot solution and so forth. There are a lot of competitors actually, but we found value in the technology as well as the senior management team. And Telexistence is 1 of the 3 companies that we invested in recently. They develop and deploy remote control technology and AI robots. In fact, they have signed big deals with major convenience stores in Japan. They are good at developing AI-based robots. And their growth potential, again, is something that we are excited about because it's so relevant to your everyday life. Now let me talk about financial strategy. No change at all. No matter how fast or slow to resume investment, we want to make sure that we adhere to our financial policy. And this is the commitment we have made and we still have. And also, financial management adaptable to both defense and offense is another pillar of the strategy. Our financial policy includes maintaining LTV below 25% in normal times, maintaining at least 2-year worth of bond redemption in cash. I think we have 6-year worth of bond redemption in cash actually, maybe too much. But again, we need to make sure that we have plenty of cash position for bond redemption. Bond market may get shut down immediately. When the bond market or the CP markets close, companies that rely too much on those markets may go bankrupt immediately. There are a lot of risky or dangerous companies in Japan. We, as an investment company, may be one of those companies if we fail to operate properly. Bond maturity, 3-year or 5-year or 7-year, let's say, there are 5-year bonds. And when maturity comes, should we return to you in cash or would you like us to give you similar financial instruments? We want to ask the questions to those investors. For that, we need to have plenty of cash in our hands. And sometimes we get criticized and that criticism is wrong. And once you face market risk, for investors, it's important to have options. So again, running a business safely is something that we need to keep doing. And also, we want to secure recurring distributions and dividend income from SVF and other subsidiaries. Again, offense and defense. We want to be flexible in running our financial operations. If you look at the top right, investment in the information revolution. While maintaining financial stability, we don't want to miss opportunities. We are information revolutionists, if you will. We need to take a lead in the global environment. And the necessary investment activities are something that we will do but, at the same time, we have a very stable, safe financial operations. Capital allocation and the return to shareholders are something that our investors are interested in. Financial improvement is something that credit investor may be interested in, and new investment is needed for company's growth. And shareholders return is important for investors. And financial policy is also important. We made share buyback worth JPY 4.5 trillion recently. We will do that, but the timing and how much give us some flexibility. And we work on improving our finances and we make sure we have a very strong financial policy to meet promises that we have with credit investors. Last, but not the least, let me talk about taxes. I think, I have never talked about tax in a public forum like this before. And there is some misconception that SoftBank does not pay tax. In fact, some media has such misconception. Look at those numbers. In fact, we have paid a lot of taxes. On a consolidated basis, from FY 2018 through 2022, if you look at the top right, JPY 2.6 trillion. So for 5 years, we have paid JPY 2.6 trillion. Usually, every year, we have paid JPY 500 billion about year-on-year and telecom operators pay tax. Yahoo! pays the tax, but holding company does not pay tax. Again, that's misconception. If you look at somewhere in the middle, in FY 2022, Japan, JPY 469.7 billion. That's the tax that we paid in Japan, including operating company's tax, JPY 255 billion. Not only tax paid by operating companies like SoftBank and Yahoo!, SBG and intermediate holding companies pay the tax as well. Through holding companies, we have made a lot of investments. SBG standalone and 100 subsidiaries controlled by us, and if those 100% wholly owned companies were sold, then those wholly owned companies paid the tax. So again, effectively, SoftBank Group has paid JPY 214 billion in FY 2022. Overseas, of course, we paid JPY 56 billion in FY 2022 as an investment vehicle. So again, in Japan as well as overseas, we as an investment holding company paid taxes. Just for your reference, top 10 consolidated corporate income tax payments. I wish media had created a chart like this, but we have done on behalf of them. TOYOTA MOTOR, of course, they paid a lot of taxes. And NTT -- and we are actually not far from NTT. So again, we work for the company and we work for the country. We pay tax. So that's something that we'd like you to pay attention too as well. So that's all for myself. And thank you very much, and we look forward to hearing from you in question-and-answer session. Thank you.

[Interpreted] Now we would like to move on to Q&A session. First, we would like to take questions from the floor. Please wait for the microphone and start with your name and affiliation. For those who are on Zoom, please, as we ask that you turn off all the other live webcast to prevent any echoing. Please press Raise Hand button and wait for your name to be called. If you like to withdraw your questions, press Lower Hand button. We would like to take up to 2 questions per person so that we can take questions from as many people as possible. We are -- also, if you are on the Zoom in Japanese, please ask questions in Japanese. Now we are starting from the floor. If you have any questions, please raise your hand. So first row person, that I would like to take this person's question first.

[Interpreted] My name is [ Shikata ] from Nikkei Newspaper. I have 2 questions, please. First, Masa said in AGM talking about shifting to offense mode. So at the AGM, he is now that, I believe, changing his phase from investors phase to the operators phase. So semiconductors, robotics and so on. Other than investment, what kind of activities that the Masa does? Or the -- what do you think for the -- as an activity for the turning around or the shifting to the offense mode?

[Interpreted] Masa, as for Masa, is he investor? I believe, he is entrepreneur. He is the founder of SoftBank, and he is always keeping his entrepreneurship in his mind. But once you start business, you also need to do the operation. And you have to do the operation, then there will be many stakeholders. You will have accountabilities. You have to keep the governance and compliance for the business. And he saying that its right-hand side of brain and the left-hand side of brain. And that is, the operation is actually the left-hand side brain work. But actually, the enhancement of the value of the SoftBank Group, I believe that he needs to use his right-hand side of the brain and that it contributes most for the growth of the business. And he believes in that and we think that way, too. So as hearing your question, from investor to business person, you may see him in that way. I understand what you mean in the past few months, or in the past 1 year or so. And also, his comments or explanations in AGM looks like so, I understand. But what he is doing? He's very much focused and dedicated into AI business. What can we do? What should he do? That's something that he is thinking around the clock, 24/7. And we are having meetings almost every day and we are hearing his energy out from his body. And that's a tremendous energy that he is generating here. So of course, the investing activities and also start the business by setting a company, those kind of things can be one of the things that he may consider. But many things can be done, but the very root of himself is entrepreneurship, I believe. And based on that entrepreneurship, that he would like to access to the many areas. And we are the operating side. We are the operating team, that we would like to kind of bring it down to the business based on his ideas and the goal and crystallize the value. That's a bit a big picture answers, but that's the answer for your first question.

[Interpreted] And my next question is the interest rate hike that I would like to ask you about. Rate hike in the raising market or the situation may have changed. In the previous earnings, you also mentioned that the rate from the floating to fix, that you've been already addressing the rate hike. But even in a fixed rate, but when you refinance the debt or the payments of the coupons, how do you addressing the current status of the rate hike?

[Interpreted] Actually, these days, rate hike is not the reason that we are changing from floating to fixed, for example. Regardless of good or bad, in the past 20 years, we've being enjoyed the very low -- lowest rate so far. And me, for example, 1987, I became a banker and started as a business person in the bank. And it was 6.5% for the long prime rate and the pension was 5.5% or to 6% because I joined Trust Bank. So those are the numbers that I remember. And compared to that, that 20%, in the past 20 years, this rate is almost nothing. So that changing to the floating rate, maybe we can take an advantage of 10 basis or the 20 basis. But that's not our financing activity because IRR, 30% is a business we are pursuing as a company. So we always try to take all the opportunities for the financing as much as possible. That's the kind of way we are thinking for our financing activity. As a result, when we see the rate hike, financial policy has actually aligned with this movement. We don't know for the future. Once that goes on and on and then, there are some time whether we may see some decrease in rate as well, and what we should do is something that we should consider when that time comes. But the 30 years to 50 years, that's kind of a long-term that we've been with this rate environment. And I don't believe that we need to rush at this moment. Weak yen, strong yen, therefore and foreign exchange is a big concern, but we would like to pay a close attention to that. And -- but at the same time, whether we can finance -- whenever we want to finance, that I think -- I don't care, I don't consider much, because we have confidence in our credit and the asset balance of the company and the status of such assets. We believe, that we will be able to raise when it is necessary.

[Interpreted] So you have a cash position so that you don't need to depend on the refinance of the debt. Is that what you mean?

[Interpreted] No, the bond market itself is functioning very well at this moment. So that, when the redemption timing comes, for example, domestic bonds, I believe we have a full access to the domestic market, bond market. For the foreign bonds, about a year ago, the financing cost was over 10%. In such circumstance, we just need to change the raising market. In those cases, we just shift towards domestic and raising the domestic market. So that's the kind of operation that we can study. But the rate itself, because right now, the things that we already raised mainly are the fixed, so that we don't need to see the change of the rate. And going forward, when the maturity comes and when new financing comes, then that's going to be using a new rate. So a little by little, we may having some impact from the rate hike, but the maturity is actually diversified over 10 years. So it's not that the big change will occur in 1-year, 2-year. When it comes to the global bonds, if the rate is high, we don't need to do the global bonds, but also need to see the deposit and the loan balance. We have almost JPY 6 trillion cash and 80% are managed under U.S. dollars. And then looking at the yield of U.S. dollars, actually it's very high and so that we will be able to net out of those. So that considering that balance, I don't see any big issues for the management of such cases.

[Interpreted] Next question from the floor.

[Interpreted] I have 2, actually. First, about Arm. Arm IPO preparation is going well, you mentioned. But timing and NASDAQ, where -- anything, could you give us a little bit more color, please?

[Interpreted] Who?

[Interpreted] [ Olivan ] from Bloomberg.

[Interpreted] Sorry, I can't say. I'm not allowed to share more. Forgive me. But I don't think it's far away when you get more information.

Questions for Navneet about Vision Fund investment plans. May I ask how much money is left at Vision Fund 2 to spend? I see in the slide that it -- there is a section in the slide it says total dry powder to invest in $19 billion plus. Could you clarify what this figure is?

Yes, thank you for the question. So the $19 billion figure covers Vision Fund 1, Vision Fund 2 and the LatAm Funds. For Vision Fund 2, the total commitments are $60 billion. And as you see, the acquisition cost, is $51.5 billion. So we have over $8 billion of available capital in Vision Fund 2 to invest.

And sorry, could you also elaborate maybe a little bit on the pace of investments going forward since you started investing now?

Sure. As Goto-san showed in one of his slides, the pace is definitely increasing. Given Son-san's comments at the June shareholder meeting that we're going into offense. And you can see, in the June quarter, we spent close to $1 billion of investing in Vision Fund 2. So it's more than the prior quarters. But at the same time, the bar for investing is very high. There has to be investments that meet our targeted threshold and they have to be companies that are focused on next-generation AI with high growth potential.

[Interpreted] Other questions? Then I would like to take a question from the black jacket person, please, in the front row.

[Interpreted] My name is Yamaguchi from [indiscernible] paper. So back in May, S&P announced the downgrade on you. And can you give us any comments about that? And another question is about Arm valuation has been increasing. But how you compare with other peers? Why did you mark up the Arm valuation, please?

[Interpreted] Yes. The first question, Arm valuation -- sorry, the first question about the grade credit rating of the S&P. So that's up to rating agency to provide the rating index. But this time, the highlight or the interpretation is different from what we understand, and that has something that we do not agree and that we've been keeping a dialogue with S&P simply. But asset -- amongst the assets or the other asset diversification, they see -- S&P sees negatively if we have a ratio of 50% bidders for the public securities among our net assets, because we have monetized Alibaba share, and that became cash. And the cash, I thought, is safer than public securities. That's my question that are given to them. And their asset valuation value does not have a cash item. So that, I think, there are many ways to understand the company, but we have about JPY 6 trillion of the cash with us. So that -- it's not that we have to -- or we're forced to sell the securities to put money. But we just tried to get safer by divesting the Chinese assets, for example. Therefore, we believe this is something that we are not forced anything, but just trying to avoid the risks. After the events of the downgrade, we've been keeping the communications and dialogue with the senior members of the rate agency. Next day of that announcement of downgrade, actually, many of the credit analysts issued the reports and made the comments that they agree with our interpretation, which was a very good news or the good report. But we don't want to make any misunderstanding in between 2 parties so that we would like to keep a good dialogue with the company. And for your next question, the valuation of the Arm, Navneet?

So as Goto-san said, we cannot comment too much on Arm given the quiet period. But in terms of the Arm valuation, just like all of our portfolio companies we look at a number of factors. We look at the multiples of comparable companies. So the comparable companies to Arm, their multiples have expanded. And then the performance of Arm, it has shown very strong top line growth as well as EBITDA performance. So in light of that, we took a small markup on the Arm valuation in the June quarter.

[Interpreted] Thank you very much. Any more questions from the floor?

[Interpreted] Ohno from Yomiuri Newspaper. Going forward, what's your view, Goto-san? I understand your view in short term, but going forward, risk environment and market trends and also Arm IPO, which should come sooner rather than later. You indicated an once Arm is listed, you expect increase in valuation. So again, all in all, what's your view going forward?

[Interpreted] As an investment company, for our stakeholders, we should do what we need to do for those stakeholders. From that perspective, for example, an event of Arm IPO, if it takes place soon and if everything goes smoothly and Arm values go up, and we have more room for investment. And with that capacity, how much we can invest in a safe manner? We should have more than such money. Of course, we need to fulfill our accountability. At the same time, we need to do execution. We need to look at the good side and bad side of environment. For example, Nikkei average is JPY 32,000, which is comfortable for us. But of course, we need to keep watching how the stock market goes to make sure that we are ready for any contingencies. How much sensitivity should we have and how much safety that we should have and then how much can we invest? We are going into a positive cycle. And of course, we want to have -- keep having offensive mode. But also, we need to be defensive as well for some time. At certain point, we may take a different stance, but for the time being, we don't think we should change our policy drastically.

[Interpreted] Any other questions? Then would you like to take a second row from the front. The gentleman, please?

[Interpreted] Matsuzawa from Mainichi Newspaper. On the Page 9 of financial report, that I would like to have more color. Page 9 of financial report in the middle, holding company business loss; second column, T-Mobile share, you have a right to purchase shares, and the loss is JPY 1,053 million. You have a right to purchase in free, but you have loss recording here. And that derivative, I understand, but can you give us a little bit more color on this?

[Interpreted] Yes. So for this option is every quarter, we value on the fair value basis. And it's been cumulated already. So simply put, compared to the previous quarter, this quarter share price has declined. As a result, valuations has decreased -- the value has decreased, sorry. And the options right is -- the condition is $150 or [indiscernible] of 45 days. So once that you see the decline of the share price, then the value is going to decrease as well. So it's kind of a period during this quarter. That when you see the share price down, then the value decrease as well. So that is why that we called it loss this time.

[Interpreted] Then you said you have a right to obtain or acquire. But do you need to acquire?

[Interpreted] We have a right to be able to receive in free so that if the -- once that condition is achieved, we have right to acquire this much of the shares in free. So this writing, in a financial report, there are some other writing as well.

[Interpreted] Page 25, it says uncertain conditions, is this same thing?

[Interpreted] No, that's different things. That portion is a contingent value right. That's a different things than that one. So that's separate.

[Interpreted] Then Page 59 in the middle. So the fair value of contingent consideration is what you have said about the right. And also after then, on what page do you have a footnote on the -- I couldn't find the page of the financial report. Footnote, fair value of contingent consideration details is needs to refer to bucket of 2 and I couldn't find the bucket. Let me come back to you with the pages -- number pages. What I didn't understand is in free, you can acquire those shares in free. But still you're recording loss this much. In every quarter, you're recording so that -- although that you're acquiring in free, but you have recording loss for that much. That's your explanation.

[Interpreted] Every quarter, we value, we check the value and sometimes by the increase, sometimes decrease, and this time recording loss, because of that.

[Interpreted] Any more questions from the floor. So we are going to take the last question from the floor now. Morita from Toyo Keizai.

[Interpreted] I have just one question. Any relationship between the latest investment versus investment policy? For example, in logistics, 3 companies in logistics, and Tractable AI-powered, we will review policy. So I wonder if -- of course, you want to have defense of funds in terms of financial policy. But when it comes to investment, do you still being aggressive or more conservative?

[Interpreted] Financially, yes, we want to be defensive as well as offensive. We have, for example, investment committee. We have heated discussions at the Investment Committee. So 3 years ago, for example, at the Investment Committee, discussion was probably focusing on speed. And maybe now is the time when we should have -- take a look at more in details. And focusing on AI is something that we value this time. In the past, we might say that we invest in AI, but there are some companies that they are not really doing AI thing.

[Interpreted] From your perspective, when it comes to investment stance, what's changed? Or if any, if you have changed any investment stance?

I agree with Goto-san. You mentioned Tractable. We are very excited about that investment. It is definitely leveraging AI to make better decisions with respect to vehicles. So it's not necessarily a focus on logistics or any particular sector. It -- the focus is really on mid- to late-stage next-generation AI-focused companies with high growth potential at valuations that we believe are attractive.

[Interpreted] So at the moment, policy remains the same. But Goto-san, you make sure that you focus on AI with more attention to details.

[Interpreted] Yes, yes.

[Interpreted] Next, we would like to take a question from Zoom participants. To avoid any echoing, please turn off all the other live webcast to prevent any echoing. And also if you are in Zoom in Japanese, please ask questions in Japanese. And now we would like to ask Mr. Nakagawa from NewsPicks.

[Interpreted] Yes, this is Nakagawa from NewsPicks. Can you hear me okay?

[Interpreted] Yes. Please, go ahead.

[Interpreted] Vision Fund, one question for the Vision Fund. Is the commitments total amount funds to commitment total? In the previous earnings, $56 billion, and this time $60 billion. So that looks like commitment amount has increased. So about JPY 4 billion has increased. What is the background for increasing this amount? And also, you've been running some restructions in the fund as well. And the headcount after the restructions has -- that being stays the same, but still restart investment activities? That's my first question. And for the second question, robotics or in the logistics that you mentioned earlier. So there are 3 companies you gave us as an examples for the investments. And I believe this came from the SBG's investments, I would like to ask Goto-san about this. But you have investing in logistics, robotics quite a large billion kind of a size. And any kind of common background for those 3 companies, for the investments?

[Interpreted] Yes. So first, questions regarding Vision Fund. That commitment amount increased. Yes, amount has increased a bit here. But the Vision Fund 2, actually, we don't set any upper limit for the commitment yet, so that when we see any new pipelines and when we see more and more pipelines comes in, then we would like to flexibly increase so that you may see the same kind of trend in the future again. And for the restructurings and the impact for the investment policy, Navneet, would you please cover that?

So you're correct that we've had 2 rounds of restructuring. One was in September of '22 and then we had another one in the June quarter. We now believe we have rightsized the organization for the investment opportunities that we see ahead. And this is the right size of the organization, both on the investing side and the functions.

[Interpreted] And for your next question, logistics area, it's not that we're especially looking into logistics areas and forecasts, and look for the potential companies, anything like that. But actually, when we see the growth of the business in AIs and so on, especially for the Symbotic and Berkshire Grey, we have already invested in those companies in the past. And now that we see that the more deeper understanding of such companies in this AI introduction trend, then that we believe we would like to have -- we wanted to have a good communication with the management of those 2 and decide to have investments in those 2 companies. So that -- once again, it's not that we're limiting ourselves to these sectors or area. There are many other pipelines in other areas as well for the coming quarter. So over years, that we would like to access and look for the good companies for the AI companies and every time when the time comes, we would like to update you.

[Interpreted] Thank you very much. In the interest of time, that was the last question we take this time. Again, thank you very much. This concludes the SoftBank Group Corp. earnings results briefing for the 3 months period ended June 30, 2023. The video footage of this briefing will be uploaded on our corporate website. Thank you very much once again for joining the SoftBank Group Corp. Earnings Results Briefing for the 3 months period ended June 30, 2023. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]