Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Company-wide revenue grew 7.6% year-on-year, indicating strong performance.
- Consolidated adjusted EBITDA increased by 21.7% year-on-year, reflecting improved profitability.
- The company announced a JPY150 billion share buyback to maintain its prime market listing and improve EPS and ROE.
- PayPay consolidation and account advertising continue to be significant growth drivers.
- Product enhancements, including the renewal of the Yahoo! JAPAN app, are expected to drive top-line growth.
Negative Points
- Security-related measure costs of approximately JPY3 billion were recorded in Q1, impacting overall expenses.
- The number of LYP Premium memberships declined quarter-on-quarter due to the absence of promotional measures.
- Display advertising growth was only 0.9% year-on-year, indicating slower momentum in this segment.
- The company expects higher sales in the second half of the year, which may create pressure to meet targets.
- There are concerns about the impact of third-party cookie regulations on future advertising revenue.
Q & A Highlights
Q: This time there was a gain on loss of control. Last year, Webtoon equity profit. Are there any more significant non-operating items expected? Also, regarding LINE Pay closure, how will it contribute to earnings next year onward?
A: We are not expecting any major one-time factors for Q2, Q3, or Q4 this year. If there are any, we will provide sufficient explanations. Regarding LINE Pay, after its closure in April 2025, we expect a gradual reduction in negative profit impact. However, we cannot disclose specific amounts at this time.
Q: The start of this fiscal year is quite smooth. Can we expect such expense control to continue into the second quarter and beyond? Also, when can we expect the advertising sales momentum to pick up?
A: For Q2 and beyond, subcontracting costs will be maintained at Q1 levels. SG&A will likely increase towards the year-end due to sales promotions, but this will be linked to revenue increases. Regarding advertising sales momentum, our measures are mostly medium-term. We expect the impact of initiatives like the Yahoo! and LINE app revamps to be felt in the medium-term, within one to two years.
Q: What is your outlook on security measures costs and the consolidation of LINE and PayPay? Also, regarding the JPY150 billion share buyback, what will be the relative weight between A Holdings and ordinary shareholders?
A: We are assuming JPY15 billion for security measures this year, with costs remaining stable in Q3 and Q4. For the share buyback, we adopted a JPY388 per share price based on the one-month average ending yesterday. More allocation will be given to A Holdings to increase the floating share ratio. The structure of A Holdings' shareholder position will remain at 50-50 between NAVER and SoftBank.
Q: What is your perception of the advertising market trend, and what is the likelihood of outperforming the plan for the full year?
A: The overall market is in a moderate recovery phase, with upper single-digit growth expected. Our account ad is performing well, and we expect continuous growth in the medium-term. The search ad on LINE Yahoo! properties is also robust. However, we need to strengthen our focus on the display ad domain, which will take some time.
Q: Regarding the first quarter performance by segment, which segments were particularly strong? Also, what are your criteria for additional share buybacks?
A: The Media business and strategic segments outperformed our internal targets. For share buybacks, we will consider growth investments like M&A opportunities and compare options before making a final decision. We have not yet decided on concrete terms for additional buybacks.
Q: Could you explain why PayPay's profit was higher than expected, and what do you expect going forward? Are there any new initiatives at PayPay?
A: PayPay's profit was higher due to cost control and nearly 20% transaction value growth, driven by product improvements. Going forward, we aim to increase per person usage frequency and promote PayPay Credit to generate interest income. We expect to maintain a certain level of profitability.
Q: What is the current situation with LYP Premium members, and what initiatives are you taking? Also, what is the outlook for PayPay's standalone earnings?
A: For LYP Premium, new acquisitions were high in Q4, but conversion to paid members was slightly weaker than expected. We plan to offer more product benefits to increase retention and membership attraction. Regarding PayPay, we aim to achieve a positive operating profit this year and exceed a two-digit billion OP for the full year.
Q: What is your perception of the advertising market trend, and what is the likelihood of outperforming the plan for the full year?
A: The overall market is in a moderate recovery phase, with upper single-digit growth expected. Our account ad is performing well, and we expect continuous growth in the medium-term. The search ad on LINE Yahoo! properties is also robust. However, we need to strengthen our focus on the display ad domain, which will take some time.
Q: Could you explain why PayPay's profit was higher than expected, and what do you expect going forward? Are there any new initiatives at PayPay?
A: PayPay's profit was higher due to cost control and nearly 20% transaction value growth, driven by product improvements. Going forward, we aim to increase per person usage frequency and promote PayPay Credit to generate interest income. We expect to maintain a certain level of profitability.
Q: What is the current situation with LYP Premium members, and what initiatives are you taking? Also, what is the outlook for PayPay's standalone earnings?
A: For LYP Premium, new acquisitions were high in Q4, but conversion to paid members was slightly weaker than expected. We plan to offer more product benefits to increase retention and membership attraction. Regarding PayPay, we aim to achieve a positive operating profit this year and exceed a two-digit billion OP for the full year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
