Earnings Transcript for 4689.T - Q3 Fiscal Year 2022

Operator: Thank you very much for taking part in the conference call for Z Holdings Corporation Business Results FY 2021, Q3. Today, we will be using the presentation materials posted on the website titled Z Holdings Corporation Business Results FY 2021, Q3. Today we are being attended by Takeshi Idezawa, Representative Director & Co-CEO of Z Holdings Corporation and Mr. Takao Ozawa, Director & Senior Managing Corporate Officer, Ryosuke Sakaue, Senior Managing & Corporate Officer & GCFO as well as, and Mr. In Joon Hwang, Senior Managing Corporate Officer & CGIO. We will first ask Mr. Sakaue to go over with us the results of FY 2021, Q3. After that we will have Q&A session. The conference call is expected to last one hour and 30 minutes. This conference call will be live streamed. And so let me note, in regards to this live streaming, if find any disturbance in audio or image while watching, please try switching to different server from the bottom of the screen. With that, we will start the conference call, Mr. Sakaue, Please?

Ryosuke Sakaue: Ladies and gentlemen, thank you for joining us today for free Holdings corporations, key you three financial results briefing. Before I start explaining the financial results, I'd like to make an announcement. As of 01,April, the President and Representative Director, CEO of Yahoo! Japan Corporation will become Takao Ozawa, as an announced on January the 31st. Mr. Kawabe will focus on the rule of co-CEO of Z Holdings and will further strive to navigate the entire Z Holdings group. We have decided on the change in management, as we regarded that Mr. Ozawa was the best person to accelerate the further growth of Yahoo!Japan with his abundant experience to date. I'd like to hand over to Mr. Ozawa for a few words.

Takao Ozawa: Hello, my name is Ozawa and I have been appointed to navigate Yahoo!Japan as its president and representative director from 01, April. For Yahoo in Z Holdings, it is one of the key subsidiaries and I feel a great amount of responsibility. There are various services at Yahoo. We would like to become a good company that offers great services so that to our shareholders, to our users, as well as to our employees I really hope that we can contribute to everyone even more. And I would like to ask for the ongoing supporter of our investors as well. Thank you very much.

Ryosuke Sakaue: Now, let me move on to the explanation of financial results. Please turn to the next slide. Here are the topics of financial results for Q3 FY 2021. There are two points I would like to make. First of all performance came in quite nicely three months ago, compared to our assumptions. We were able to see our performance exceed expectations and satisfy. We decided to take the upward revision and guidance. Secondly, for LINE GIFT and group centered GS were generated we were able to release new services during this quarter. Of course, great contribution to performance is still yet to be seen. However, with its contribution to wins, we would like to make great efforts. So that was a summary comment for Q3. So I'd like to go back to the main presentation to speak. So we were able to see continued growth and advertising business led to record high operating revenue of JPY409.1 billion of 29.2% year-on-year and adjusted EBITDA a of JPY97.9 billion up 24% year-on-year. For profitability, of advertising business is high and the performance was good. And Yahoo!Japan license contract was terminated and royalty expenses went down. Therefore we made an upper division on the adjusted EBITDA a guidance to JPY330 billion or more. And for the advertising business, it reached a new record high of JPY153.4 billion of revenue with growth in both Yahoo and LINE due to new line advertising products and recovery in advertising demand. In terms of topics therefore LINE GIFT quick commerce expanded, and also in the commerce area, we were able to generate synergies increasingly. In addition, the release of the PayPay card and the change of the bonus brand for Yahoo services expanded convenience across the commerce and financial domains. In addition from yesterday we launched in phases, PayPay [indiscernible]. Finally, we continue to promote capital market and environmental initiatives, including the transition to the prime market and the declaration of carbon neutral. Please turn to the next slide. Company-wide adjusted EBITDA a was revised up to over 330 billion from the announced at the beginning of the fiscal year, adjusted EBITDA for each segment has also been revised in along with business progress. So I'd like to briefly go through by segment in the media business. The main reason for the increase in earnings were higher earnings than advertising business and lower Royal expenses due to determination of the Yahoo on license agreement and the commerce business. The upside was due to investment and expense control in the shopping business with an eye on essential platform improvements like we've been saying from the beginning of the year. As well as the fact that logistics related investments linked to GMV did not increase as much as assumed. That is why we were able to exceed in the strategic business. The upside was mainly due to the delay in the release of PayPay card and PayPay, which was later than expected, compared to what we were assuming at the beginning of the year, which result paid in a decrease in six cost and we were also being selective about line related investment projects. For the final item, which is concerning other adjustments, as current performance is strong and the retention and recruitment of talented personnel is becoming tougher, as a company that strive for medium to long term growth, human resources and talent are truly important to us. And we believe that we need to make investments into our people. Therefore common human resource related investments have been increased leading to a downward revision with is specific to this fiscal year As a result of a strong performance of the advertising businesses of Yahoo and LINE, we expect company-wide revenue to come in at the upper end of our previous guidance at JPY1.57 trillion. Please enter to the slide, on December the third, last year, we passed a resolution to acquire treasury stock through tender offer retire, treasury stock and issue stock acquisition rights as part of our efforts to transition to the prime market. Just explain a little bit more, the exercise price of the stock acquisition rights has a minimum exercise price. And if the stock price falls below the tender offer price of JPY663, the stock acquisition rights will not be exercised from the standpoint of economic rationality, a scheme that avoids dilution of the stock value. If all the stock acquisition rights are exercised in the future and the distribution to the market is completed, it is expected to meet the ratio of tradeable shares required to maintain the listing on the prime market. In addition, as announced by the TSE on January 11th, the company scheduled to switch to the prime market on 04, April. Please turn to the next page. In order to unify the loyalty program, we have expanded places where pay bonus can be used, first of all, for online, we will change the use in granting of P points for Yahoo services to PayPay bonus in April. For offline, from December last year, we started giving PayPay bonuses for PayPay card payments In this way, by unifying the bonus brands for eCommerce and the financial businesses into PayPay, we aimed to further improve the convenience for PayPay users. We plan to unified the loyalty program and a future, and we aim to further expand the ecosystem by encouraging cross use of services from three action points, taking advantage of one of the largest user bases in Japan. Please turn to the next page. Today, past noon, we announced that we announced the 2030 Carbon Mutual Declaration to reduce our Greenhouse Gas Emissions to virtually zero by fiscal 2030 in January last year. Yahoo!Japan declared about a hundred percent renewable energy challenge for fiscal year 2023, aiming to achieve a hundred percent renewable energy for electricity use in its business activities as soon as possible. This time grip companies such as LINE and Yahoo will also aim to become carbon neutral of by fiscal year 2030. To achieve this goal, we will convert more than 80% of our electricity to renewable energy by around fiscal year 2025 and promote the conversion to a hundred percent renewable energy in the following five years. That is our roadmap. In addition, in order to absorb greenhouse gas emissions from other group companies, Yahoo!Japan, which is leading the way we'll start carbon negative initiatives and the entire group, hence will aim to become 2030 Carbon Neutral. Please turn to the next page from here on. I will explain the three agenda items and disorder. Please turn to a next page. First. I will explain the consolidated result for the entire Company. Next page use, like I mentioned, at the beginning on a consolidated basis, revenue increased and profit increased on an adjusted EBITDA basis, mainly due to the effect of the integration of line. The quarterly revenue of JPY400 billion for the first time ever. Please turn to the next page. Next are the consolidated results for line, despite increased investment for growth and LINE GIFTs and financial services, high growth, and the advertising business and investment discipline resulted in a fifth consecutive quarter of positive of operating profit. Please turn to the next page, group related sales revenue for the entire group is shown here. In addition to the effects of the integration with line demand, recovery, monk, advertisers, and other factors led to solid growth in Q3, with company-wide revenue reaching JPY153.4 billion 64.2% year on year. Please turn to the next page. Next is the whole group's e-commerce transaction volume. Although the previous years' hurdle was high due to the strong performance of the service business as a result of the go-to campaign, the steady growth of the merchandise transaction value resulted e-commerce transaction volume of JPY977.5 billion of 6.5% year-on-year. Please turn to the next page. Next, I will explain the topics and results by segment. Next page, please. First is the media business. Next page, please lines new advertising products talk, head view custom is doing well since it's released. We were able to take advantage of the demand for advertising in through December, which is a high demand month. And we were able to acquire brand advertisers that we had not been able to acquire in the past, such as jewelry and automobile advertisers. As a result, as a media section, we were able to improve profitability. Please turn to the next slide. This is line zoom. In November -- in November, 2021, we started to offer the line zoom service with timeline being revamped. We renamed it as a video platform and we'll strive to grow the business into expanding video market. After the renewal, the number of users viewing per day increased by 37% going forward, we will increase video continent stages to promote user use and expand video advertising. Please turn to the next page. Here we show advertising revenue for Yahoo. So the result for Q3 was hundred, JPY2.4 billion, which was a growth by 9.6% year-over-year. Now, again this is backed by advertisers demand, recovering, and also in Yahoo, we have been able to switch the display app to one platform. And so through these improvements, we have been able to find quarterly revenue exceeding JPY100 billion for the first time. Especially for search ads, we have been able to see a very continuous UI improvement. And so therefore we have been able to mark a continuous double digit growth. Next page, please. Here we looked at line advertising revenue, which is also making a very good progress as for display ads, just like Yahoo, we have been able to see an increase in advertisers demand. We have also been able to, again, introduce new products. And so therefore we've been able to achieve JPY 29.3 billion in revenue, which is a 31% increase year-over-year for account at again. We have been able to see number of accounts opening in increase. And so therefore we've been able to achieve JPY 20.1 billion yet in revenue, which is 11.8% increase year-over-year. Next page, please from here, I will go over our commerce business. Please go to the next page. Now I know some institutional investor are asking about their shopping platform because there are varies of them. And so this time around, we have decided to again, revisit how we try to differentiate ourselves. So starting from the left hand side, you have lab Yahoo!Shopping, PayPal Mall, Digital local. So to, for these existing e-Commerce business, it is very about making sure we be able to refine intrinsic service values to expand transaction value, and at the same time from middle to right here these are exactly the platforms that we're trying to differentiate ourselves from the peers in other words, quick commerce in social commerce. Now here, we're trying to make sure we be able to utilize our group assets so that we be able to offer new purchasing experiences opportunities. Now, the background behind that, we know that there are varies of user needs now, and our group. We want to make sure that we be able to not just offer our service in one platform, but then we want to make sure we be able to leverage the characteristics of each of the services we'd be able to do to put forth. In other words, that's how we want to leverage our collective strengths of the group. So that we'd be able to maximize the total transaction value of the group. And from here, I would like to explain other initiatives that we're going making to make sure we'd be able to see progress, which brings us to this slide. And this is measured to increase line official account. Now the number of registered brands is expanding rapidly. And so line official accounts are spreading gradually as CRM tool for eCommerce and Yahoo!Shopping, PayPal Mall, we have many merchants there. And so to, yeah, to these people, consulting provided through line sales team who would have operational knowhow align official accounts. In other words, there's good collaboration with Yahoo and line team. And so as a result, the stores that were provided these consulting, improved its message, open rate and CTR compared to average rate of store newsletter. Next page, please here. We introduce our social commerce in other words, LINE GIFT. So this is Q3 and there's been lots of seasonal events. And along with that, we have been very proactive and marketing campaign and so the cumulative number of users surpassed JPY20 million as for transaction value. And we have been able to increase this by approximately four times year-over-year. And at the same time, we are making very good progress with group collaboration. And so store opening by group companies are accelerating and Yahoo shopping PayPay mall. We have began linkage and products and inventories between these platform, which enables us to make sure we have better assortment. And for our merchants, I do believe we are able to now offer new opportunities for sales looking from here. We are also focusing on, for example, birthday gift. We're trying to make sure able to create this social gift service, where people would be able to use on a daily basis and more casually, please go to the next page. Next is our quick commerce that we're working with ASKUL and Demae-can, just like we announced last week, as we tried to make, make a for fledged operation, we have decided to make a rebranding into Yahoo marked by ASKUL. At the moment, we have been able to expand the number of stores to nine, and we are leveraging ASKUL's product procurement capability. And so therefore we have products 1500 types of products to be handled within the demonstration, experiment this to something that we have been doing from October to December. But then the total number of orders increased by tenfold. And so through this demonstration experiment, we have been able to answer some of the questions like do we see really immediate needs for daily goods and food items? And we also have a question of, can we really make a, a good operation around this delivery, but we have been able to find confidence on that. And as we look ahead, we're trying to open several dozens of stores in the next fiscal year and establish a system that would cover all 23 wars in Tokyo. Please go to the next slide here. We show merchandise transaction value for shopping business, transaction value. We have been able to find a contribution by Cho PayPay Matsuri. And so therefore we have been able to see a 21.1% increase year-over- year. For reuse business, we have been able to find Yahoo a user expansion PayPay a higher spend for user in Yahoo and expansion and PayPay Flea market. And so we have been able to achieve a double digit growth. Now moving on to our strategic business. So here we show our PayPay initiatives. Now the impact of payment fee to small and medium sized merchant in terms of cancellation continues to be small. And so the first tier of what we call the first year of monetization we are seeing a steady increase. And also in terms of the second tier, in other words, this is about PayPay My Store. We have been able to find number of merchant that would sign up here increase steadily and PayPay Coupon usage is also increasing, which is again, contributing to the revenue growth. And through these methods, we have been able to find PayPay revenue increase. Now, when we look into the profit before acquisition cost in other words, the profit divided by deduction deducting cost of sales. In other words, fund source, plus regular user rewards and fixed cost from revenue. We do offer this type of 0.5% pay bonus. But then when we deduct that this part of the profit, in other words, again, the profit before acquisition cost, we have been able to achieve profitability into three, and it has been three years since the launch of this service. And if we decide to stop for example, not just a 0.5% pay bonus, but then if we stop paying for that tentative acquisition cost, we know that profit is in site, but on the other hand, we do not have intention to stop spending these acquisition costs. We do still want to keep on spending these acquisition costs because it would be a good seed for our future growth opportunities. Next page, please. And also in order to pursue our monetization, we're also looking into are the top, the third tier in other words, financial services, and we are making very good progress here as well. First starting from left. This is something that we started back in last December PayPay card, and yesterday you also see this on the right hand side, but we have also launched introduced PayPay automobile. And we will make sure that we will be notifying the users once we would have more services available. But then in this PayPay automobile, you can use PayPay for your payment without having to charge to the PayPay balance upfront. And this PayPay service is not just available for PayPay merchants, but then this will also be available to Yahoo, Japan, shopping and PayPay mall as well. Now with the pay we can increase more pay users, usage, spending, and balance, but also we can aim to enlarge these ecosystem through diversification and payment invest because we be able to really meet the various users, be it online or offline next page, please, ever since last year, we know that NFT market is seeing a, a rapid expansion. And so line has also started its own work here. And this is something that we have not explained before. So I'd like to use the slide here. In Japan. From last June, we have started launching NFT market beta. And so with line, you can easily send NFT and we want to make sure we'd be able to expand this NFT business through competitive advantages, levers lines features. Now we want, we will be starting line NFT in spring in Japan. We want to become number one NFT marketplace in Japan. And also last year in December, we started line next for the global financial market. And we have an entity in the U.S and South Korea. So we want to make sure we also be able to expand this NFT platform globally. So these new services like NFT, it is important that we capture the global market at an early stage. And that is very much why. We have started this. In other words, our aim is to lead a service that popularizes globally. Next page, please here. This is something that we always show in other words, major KPIs behind KPE. So again various KPIs performed well even after the introduction of, and feed to small and medium size merchants. And so the quarterly pay transaction value grew to a scale of JPY1.5 trillion. Here we show the major KPIs for PayPay card now pay card. This is something that we launched last December, and it will be accelerating membership growth by utilizing group companies, assets and for the transaction volume. Now, especially in December, that was a very high season in terms of sales. And so the quarterly transaction volume exceeded for the first time, JPY700 billion in next page, please, here we show the major KPIs of our banking business pay bank after the change of trade named to PayPay bank corporation, acquisition of especially PayPay users increased. And so you can see that these KPIs have been making very good growth. And so from here off, we do also want to make sure we be able to leverage PayPay ecosystem so that we be able to expand our financial service here. This is the financial business that we have line brand. And here again, we have a major KPIs for example, the number of accounts for line security, the loan balance of line pocket money, as well as the loan balance for line bank. And so here we show the growth rate, although we don't have the specific number itself now again in Japan we want to make sure we be able to utilize securities and pocket money to tap into potential financial needs through line and for the global financial business we want to make sure that we be able to tap into the local users, which would be different from the needs when the people in Japan next page, please. And finally, I'd like to go over with you again, the business results forecast, next page, please. And so, like I mentioned at the outset, the adjusted EBIT up, or the total group is now going to be up revised upward to over JPY330 billion. Now, if you look at each segment the revenue and adjusted EBITDA has also been revised accordingly to the business progress. So the group total revenue is now at JPY1,570 billion, which is marking the top, the guidance. And that concludes my explanation. Thank you very much.

Operator: Mr. Sakaue Thank you very much. We would like to now move on to Q&A.

Operator: [Operator Instructions] Thank you. So the first person, it will be Mr. Maeda from SMBC Nikko.

Eiji Maeda: This is Maeda from SMC, Nico. Can you hear me? How about this? It's better. My first question for this fiscal year and adjusted EBITDA a guidance of JPY330 billion, I think as a start after the integration, you are off to a good start and you analyze the reason why you are going to go through the upward ion for that ongoing component, as well as for delay of execution of expenses, which may be a negative for next fiscal year. I think there's going to be two types of items. So towards the next fiscal year of year, what does this fiscal year's performance imply? And for JPY390 billion that you're aiming for in 2024, if you have any implications, can you share that with us? Because I think at this pace you will probably be able to aim higher. My second question is about PayPay the loss equity pickup is becoming greater by a quarter. You talked about acquisition cost and that you have no intention of reducing it at this point in time. So what is your tolerance around that amount of losses generated, or do you think that losses are going to start decreasing from next fiscal year and about the timing of when you expect profitability to, to pro positive? Can you share with us your thoughts about the P&L of PayPay?

Ryosuke Sakaue: Thank you very much, Mr. Maeda. I will take both of the questions for the first question. What's about N fiscal year onwards, as well as fiscal '23 or March '24. And what we think about the targets we have in place right now. Well, for next fiscal year at this timing we are currently in the budgeting process and we are revising our midterm plan at this phase. So unfortunately we are not able to speak about next fiscal year at this point in time, but by the end of the fiscal year when we have a results briefing, we will probably be able to give you more direction. And for March 24th, JPY2,390 billion in adjusted EBITDA a and JPY2 trillion in revenue we view this as a commitment from us. So we would like to ensure that we achieve these target numbers. And we do understand where you're coming from might a fund, but JPY2 trillion of revenue and three JPY90 billion of adjusted EBITDA are numbers that we would like to definitely achieve. So for the second question and PayPay, and the loss is associated with it for this as well, expanding the user base and increasing the penetration of casual payments will in turn in the future become a good foundation for the finance business in the future. So we are not going to aim for pro viability right at once and aim to reduce costs. That's not what we're thinking about right now. So for the scale of losses, as well as the timing of when we would like to term profitable, we are talking and having dialogues with the PayPay company. So once we are able to share some direction with you we hope to do so. So for both of the questions I apologize that I wasn't able to directly respond to them, but that's basically your response must. Thank you very much.

Operator: Thank you very much. We will move on. The next question will be asked by Ms. Haruka Mori from JPMorgan Securities.

Haruka Mori: Thank you very much. I also have two questions I'd like to ask. My first question is about your strategic business. So when you look into Q4, I'd like to ask your plan. So for example, Sytech sales, I believe it is expected to grow more, but then at the same time, there's also going to be a loss that would also increase in Q4 now PayPay card. And I guess it is partly because of that, but then can you give us a little more about the flavor of your plan for Q4 and also for next year, these new services that you have, I suppose, will start to contribute to at least shrinking some of the loss that you already have, or is that what you have in mind or do you think you still need to be on in that? For example, I do believe that within your strategic business there are some areas where you still haven't been able to make some investment and you will just keep on making an investment. Is that really your thought? So that's my first question. My second question is around your commerce business. So like social commerce, quick commerce, these new initiatives and also for my smart stores, I believe each of these new businesses will be in a different phase, but when you look into next fiscal year, what kind of contribution do you think these new initiatives would start contribute this year? Commerce business. I think you've been able to work a good control in the cost and GMV has been increasing very well, but now that you have new initiatives, will there be more investment next fiscal year, or are you going to keep on controlling the cost and be able to see the benefits coming from the contribution coming from these new initiatives?

Ryosuke Sakaue: Yes. thank you very much. I would, again like to answer these, your two questions from but then I do believe perhaps Mr. Ozawa can follow up the second part of your question as well, but again so Q4, what is our outlook for the strategic business? That's your first question. And also how do we see the next year I took that is your first, the question. So for the strategic business, thank Q4, of course, if you just calculate, you'll be able to calculate what kind of EBITDA are we expecting. But then for PayPay card and we also have the automobile and so for these we need to, first of all, invest so that we be able to capture new users. So that's one thing that we will have to do. There is a portion of investment for that. But then at the same time it may not be as large as a PayPay card, but then line securities and nine credit. This is again where we are seeing an expansion of user base. We want to make sure we be able to accelerate that in other words, invest as for sales promotion in these areas. In other words, there will be a loss that will increase in Q4 in that sense. So that's my response to your first part of the question, but then as for next year, of course, when we look into a next fiscal year, we still expect that there will be loss coming from most of these new initiatives within the attendance of the presentation deck. We do have a, a specific P&L for card business and security business and example depending on the phase some will turn profitable. Some will still have some loss, but that's where we are. So that's how we view the strategic business and that really follows what was asking before. But then this is how we look with the strategic business. Now, second part is about the commerce business, social commerce, quick commerce, my smart store. How, what kind of contribution would these have now for next fiscal year? Again, this is something that we internally are yet discussing about. We do not exactly believe, believe that we be able to hold such a high expectation that these new initiatives will start generating contribution, because we do believe next year, it is still with during a phase where we need to sort of start growing keep on investing to grow these new initiatives, but if, although also I would have anything to add. Yes, so these new commerce, a part of the business, so where, what is the status we're still waiting to see if we'd be able to find a good win? So yes, we have been making some S sizeable investment but then at the same time, we're not just staying calm. Of course, when it comes to quick commerce there's the delay a very part of the cost. We need to create sites. And so the it's different from pure digital. E-Commerce, it's not like a business where we'd be able to increase the revenue by like five or six folds immediately. And so we still, we do have to plan out what the investment would be now, as we look into the next fiscal year it's, it's, for example, we can say that there is going to be a large investment and that is why we're going to make a loss. No, but that's not what we're trying to say here. But then when it comes to like the when it comes to the entire faith mix, and if we find that there needs to be a good investment made, especially for future growth, we will make sure that we be able to tell that to you up hand at the moment. We're still trying to clarify what the requirements are. If I may a follow up the LINE GIFT, I do believe there is a good rose, I don't exactly know the exact value, so I can't really say much about here, but then when it comes to the growth and if there is any like a contribution to GMV is it correct to say that lion gift does have a good presence already? Yes. Thank you very much. That's something that would like to end. So LINE GIFT in terms of absolute value. Yes, we are finding a good sizeable number. Now we are expecting that we will start to see a good contribution, some contribution, and of course it will start to generate profit under the economics, of course depending on how things go. And so, yes, this is a business where we do have lots of expectation in looking into the next fiscal year.

Operator: Thank you very much for the question. Next person is from Citigroup Securities, Mr. Tsuruo,please, over to you.

Mitsunobu Tsuruo: My first question is about numbers for EBITDA guidance. You made an upward revision this time around, so how do the following numbers fit into this equation? First of all, Yahoo! License; the termination of the contract. How much is that worth? Secondly, lines performance, previous outlook in the current outlook and the difference, thirdly, strategic expenses. You were saying originally at JPY20 to 30 billion. But how are you accounting for this time around? So that's my question.

Ryosuke Sakaue: Hi. Let me answer an order. First of all, for the Yahoo! license, it's about JPY9 billion that we are accounting for. The next one is lines outlook. We don't give out the guidance in detail, but for media, about JPY26 billion of an upward revision is accounted for. So a considerate certain portion of it is accounted for by-line. That's the way you should look at it and also for the strategic expenses, that we originally communicated at JPY20 to 30 billion. Currently we are expecting about JPY22 billion in investments. So that's, what's accounted for in the current guidance.

Unidentified Analyst: Understood. So I'm sorry. My second question. When you look at lines performance for Q3, JPY4 billion went down to JPY3.8 billion our [indiscernible] wise. Why was that? And how should we view the outlook going for word?

Ryosuke Sakaue: So the media business continued to perform risk, but line gift. It's appeared in the GMV as well, but we made aggressive investments. So we were incurring more expenses. And that is why profits declined on a year-over-year basis. For Q4 Ad revenue is expected to continue to be risk, but JPY10.6 billion for Q4 2020, there was a one-time divestment gains included in this number. So, compared to that we are expecting a decline in profits; however, the trend of heading towards profitability is unchanged. And for next year, we are currently in the middle of the budgeting process like we are for the overall company. So we are not able to speak to that. That's all for my questions.

Operator: Thank you very much. Next we will have Yusuke Okumura from Okasan Securities.

Yusuke Okumura: Thank you very much. This is Okumura from Okasan Securities. I hope you can hear me.

Ryosuke Sakaue: Yes, we can hear you clearly.

Yusuke Okumura: Thank you. I also have two questions. My first question is I know we're coming back to this again, but how you are looking at next year's outlook? So next year, it is going to be the two years before you end your current MTP. And so there could be -- for example you may want to be making investment meant to, and you can speak to the extent you can, but what is your plan for, for example, how much investment and how much profit do you -- mean to make for the next fiscal year? And also for Q1, Q2, I know there's a bit like 200,000 increase now, of course, ever since you launched PayPay card, there must have been a net increase from December and does that have to do with that. I know that your peers have also been seeing this type of increase but then from Q4 and onwards, are you, is expecting to see a net increase in this number or, or are you trying to accelerate? So if you'd be able to comment, so those are my two questions.

Ryosuke Sakaue: Thank you very much. So first of all, how we see next fiscal year, so I'm sure Mr. Okumura, you must have a lot of your thoughts, but then again are there -- it is so that we are discussing internally. So I would have to apologize. We would not be able to specifically answer your questions. But then your next question. So how what kind of growth are we seeing ever since we launched pay card? So for two, three so again, it is December the month of December alone. So you know, we have been able to make a good start, but then it's not that we've been able to find a, a large impact or large contribution yet, but then on for Q4 and onwards we talked about this is exactly where we want to spend a strategic investment. So that means in terms of the membership, we're trying to make sure we'd be able to accelerate the growth. At the same time, we have to think about efficiency in the investment, but then when it comes to the, the effective number of -- effective member user, we want to make sure we be able to see an increase and we do want to make an investment for that purpose. That's my response.

Yusuke Okumura: Thank you very much. And that's all my, that's all of my question. Thank you.

Operator: Thank you. Next is Mitsubishi UFJ Morgan Stanley securities, Mr. Araki over to you.

Masato Araki: Thank you for taking my question. I have a number related question for Q3 and the equity pickup Gains and losses. It was JPY14.4, a billion. I believe it was pretty big for Q2. It was JPY10.9. And you were saying half of that is attributed to PayPay and the other Demae-can. And I think this time around it was JPY14.5. So can you, you break that down for me and for October to December quarter for a PayPay you started to charge the payment fees to the small to medium sized retailers. So if you can talk about the way that we're that would be helpful. Secondly ID tie up with line has that started or not? My understanding is that it has not yet started. So if you're going to do this next fiscal here, how much would you need to spend? And what kind would that look like? In the case of Yahoo! there are people who have IDs, some other people do not for line. I think pretty much people are not sure if they have an ID, but they do. So when you're going to start the integration or you're going to send a notice or email, and if they agree, are you going to spend sales promotion costs, like to give them 10,000 points or something? So, can you also talk about that as well? Thank you.

Ryosuke Sakaue: So I will take both of your questions and Mr. Takao Ozawa, if they would like to add any questions at comments about the second question they will. So, first of all, for the equity pickup gains and losses, which is minus JPY14.5 billion; for the breakdown we do not disclose the actual details, but out of the JPY14.5 billion. PayPay is about 10% and former line group. It's about one to two meaning it's about one third PayPay and two thirds the best and out of the two thirds, half of that is about Demae-can, so the loss pickup between Demae-can and PayPay is about the same for the balance. In Southeast Asia, lineman, as about as line financial services, affiliated companies have been generating losses, which we also capture in pick up on a quarter-on-quarter basis there has been an increase as you pointed out, and that is attributed to the Southeast Asian business, as well as Demae-can, when you compare on a Q1 Q2 business. But Demae-can is a list of company. So I'm not able to give you a clear is, but they were doing a free delivery fee campaign in Tokyo Wells, the peripheral three prefectures right now, just to mention, so that's the answer to the first question. For ID integration, the second question at early point next fiscal year we hope to move things forward. And currently we are preparing internally. In order to promote ID integration and various promotional measures, we are actually having discussions right now about them, so we are not able to give clear guidance as to what kind of skill of promotions we have. We are considering. Do the other two gentlemen, have anything to say about this question?

Takao Ozawa: Well this is Ozawa internally. We are brainstorming right now, so let me share some thoughts we have for ID integration, we basically want to say that it's going to become even more convenient and communicate benefit to the users without spending cost. And we also want them to actually feel that convenience has been enhancing so that they will agree to ID integration. That's the base way of thinking, but that may not be enough number-wise. And if it's incentivized as a program, we will be able to promote ID integration. So that unit price for advertisements may go up and due to the synergies, there should be an uplift. And then after deducting cost, if we think we should go ahead with that, we will talk about points that people can get if they engage in ID integration, or there might be a lottery through which they can win something. So the incentives that we are currently providing may have ID integration as a condition, and we already have that kind of record in doing Yahoo! JAPAN. And PayPay are related ID integration. And we were, we didn't have to spend that much in doing so. So we would like to use money in a way that would be effective. Thank you.

Masato Araki: Thank you. For the first point on a Q1 Q basis, have PayPay losses decreased on a Q1 Q basis, or have losses for PayPay increased.

Takao Ozawa: It's slightly increased. It's pretty much flat though. Thank you.

Operator: Thank you very much. Next question will come from Ryotaro Sawada from ACE Research Institute

Ryotaro Sawada: Yes, this Sawada from ACE Research Institute. Thank you very much for the presentation. I also do have two questions I'd like to raise my first question is around your eCommerce. So if you'd be able to recap what, how you were able to find for this high season sales because I did realize that for this December there was not much of a promotion or discounts, but then users, as well as the merchants, what were their reactions if you'd be able to recap that for us? My second question is about line NFT. So within your strategy, what is your goal and also how you try to position your services, if you be a able to give a little more explanation there?

Takao Ozawa: So thank you, if I may repeat your question. So, first of all how we look into the year-end marketing campaign, how that went and what was the response from the users for the, in the e-commerce and also for NFT, what kind are we trying to roll out? And so we will make sure that we be able to answer your question. So the first question yes. This is so again for the December marketing for eCommerce, of course we're trying to make sure we be able to achieve a good growth year-over-year. That's what we always expect to do. However this time, when at the result, we do believe that it was pretty much in line with our expectation. In other words, yes, we were able to find a good growth now. We do want to make sure that we'd be able to put an eye to, to expect that e-commerce will keep on growing, especially because we're still in the pandemic and at the same time, this hometown tax that's also another part where we are seeing a very interesting growth. We are also doing a lot of a sales promotion together with those though. We've been able to see a good growth trajectory in both. And so in total, if you look at on a year on year trajectory, we do believe that we have been able to find a very good turn this time around as well. And also for the reuse side of the business, like Yahoo! Yaku market. Again towards December, there has been a very good move and we've been able to capture all the interest are the the sales. So thank you very much. The second question will be answered by Idezawa.

Takeshi Idezawa: So this is Idezawa. I'd like to answer your question around NFT. Now, as you know, for NFT. There's a lot of global payers. A lot of global players are already in this space. And so within the current trend we know that this is a very good momentum and it's really like the new platform or business trend that we need to capture. And so that's exactly what, how the holdings will be looking at this, this NFT outline ever since 2018, I have been working on block-chain. We have very much been spearheading this move. We have our original platform. And also we have do have experience of the marketplace. And so we actually do have knowledge around offering full package service around these for example, FinTech and NFT. And so we do have great is to work on this field. In addition Z holding, we do have a lot of entertainment related contents. And from that perspective I think there's this great affinity with what we'd be able to do in this NFT space as well. Japan, global market, or trying to make sure we'd be able to expand this platform in both. But then it is probably not exactly like a continuous growth that we'd be able to expect that we like we've been seeing in other parts of the business, but that's how we look at this NT business.

Ryotaro Sawada: Thank you very much. If I can just then make a follow up question to the second part of the question that I asked line NFT, what is going to be the contents there? So is this something that the holdings would be bringing is, is my understanding, correct?

Takeshi Idezawa: Well we will be making announcement in the upcoming spring, so I hope you'd be able to stay tuned. It's not that it's just going to come from just the holdings. For example, we know that there are right holders that would have great contents, and so we want to make a platform that would be open to visa other people as well. Thank you. I think I have better image now. Thank you very much. That's all for my question.

Operator: We are open for questions. [Operator Instructions] Next is from [indiscernible] securities. Mr. Kishimoto [ph]?

Unidentified Analyst: This is Kishimoto [ph] speaking. Can you hear me? Thank you for the explanation. Well, you made an upward revision and in the media visit. I presume that lines did well. And for Yahoo!, for Q3, the market was risk, I believe, but in light of that for search ads, display ads, can you give us more flavor at how they performed and when you do the math, what are your assumptions for the Q -- fourth quarter? That's my only question.

Takeshi Idezawa: Thank you for the question for the media business special without ads in the Yahoo! side and that its outlook was the point of your question. So there are several things I would like to communicate for Yahoo! ads and Q3. First of all, for search for talent property finance, it picked up as well as the unit prices also picked up from advertisers too. To that end, we were able to see 12% growth. So performance continued to be risk for this, for this part as well. Reservation type we were shifting to programmatic. So that was a positive on performance too. We also were focusing on one platform so that the tender offer can be automatic and the distribution can become improved. So we implement that. So a click unit price saw an up-lift. And so for Q3 I do believe performance was good. For Q4. It is the end of year season. So there are some unpredictable parts especially due to the economic trends, as well as the Omicron variant that we are currently seeing spreading. But for Q4 our outlook is quite on the conservative side from that point of view. I thank you very much.

Operator: Thank you very much. The next question will come from Oliver Matthew - CLSA Securities. Mr. Matthew, please?

Oliver Matthew: Hello. I have two questions. The first questions. Could you tell us more about the e-commerce sorry. The commerce business sales were up to 7% and profits were down. Could you explain more about the performance of each part of a commerce and secondly in the guidance you increased the other's adjustment quite significantly. Could you explain why that is going up and do you expect of a special adjustment in the fourth quarter? Thank you.

Ryosuke Sakaue: Yes. thank you for your question. So allow me to answer your first question. So for the commerce business, so again the year-end sales the season, and as well as line gift visa, social gift area, we have been investing in other words, sales promotion. And so that is one reason that is, so that is why even that we were able to see an increase in the sales revenue. There's been a lot of costs associated with that, and that is why profit or in other words, the profitability went down. So that's really the details to explain the first part of your question. And also for the second part of the question, in other words about, for the so again should we focus more on Q4 in that case just like we said in the presentation again, we want to make sure we be able to invest for human talent. This is because it is going to be very important as we try to fight with the peers in the, to long-term. And so again alongside with the very good performance. So with the business, we have also made sure that we be able to make a good investment for human talent and also for retention purpose, so that we'd be able to have a good base business base. And so that is why that is why for this other part there's more increase in this the number of the loss.

Operator: There are two more I Guess. We are open for questions. [Operator Instructions] The next person is Mitsubishi UFJ Morgan Stanley. Mr. Araki?

Masato Araki: I, I recently had three questions. So I'm going to ask one more question for the shopping business out of your overall upper vision. It is actually on the lower. So originally at Q2, you were talking about sales promotions for Q3, and you were saying that it's going to be slightly higher than Q2 [indiscernible]. And from JPY27.4 billion in Q2, it went up to JPY33.1 billion in Q3? And I like to ask Ozawa this question. Spending a lot of sales promotion costs in order to just increased GMV, have you stopped doing that? And in your original guidance, you were anticipating 12% to 25% growth, but then in Q3 you have decided to go ahead with at 12%, which is the lower end of guidance. Has something changed from the beginning of the year, or it was 25% a stretch target because you were saying end of year season was in line with your expectations. So is this number not weak at all? So GMV sales, promotion, and cost, and your thoughts on faulted would be appreciated. So the beginning of your target of 25% why are we going with the lower end of your guidance range this time around? That's my question.

Takao Ozawa: So this is Ozawa speaking, although take your question. First of all, for the 25% number from the time we set that target up internally we did think it was a very aggressive target because last year in light of COVID, we were able to see quite good growth. And we did also spend sales promotion expenses that also supported the growth. Of course we did control it quarter by quarter. So in light of COVID 19 in its unpredictability we weren't sure if 25% was possible, but we did set a range of 12 to 25%. And throughout the year we ended up going back and forth. But now we are expecting that the end of the fiscal year, we will be at 12%. So, and we are currently looking at the trends in GMV growth, as well as the rise cost. Of course we would've have loved to have achieved the 25% stretch target but our guidance is different from that. Thank you.

Operator: Thank you very much. Next question will come from Citigroup Securities. Ms. Tsuruo, please?

Mitsunobu Tsuruo: Okay. Sorry. I think you're muted excuse me for that. Allow me to do that once again. I'm sorry that I wasted your time. So I have a question around your strategic part. I know this is my second round and I'm so sorry that I had kept myself muted. Now I want to ask this to Ozawa or, and I know yesterday we heard that you're going to be leading Yahoo! from now, and you've already went through some press conference and you probably will be making a more formal announcement at the point of April. But then if you have any message to the investor community at this point, I love to hear that.

Takao Ozawa: Thank you for raising that question. So just like you said, it's going to be from that fiscal year. And we at the moment are trying to compile the strategy so that we be able to show you. And this is something that, of course, that we want to show to our internal employees as well. At the same time, we do want to make sure that we be clear and what our, what the new plans are to the investor community. Now, when I was given the Baton from Mr. Kawabe, now Mr. Kawabe as well as SoftBank, a neighbor who will be our large shareholder they they've given the message that they have large expectation. And this is very much because Yahoo!, when we compare to the peers on a relative matter is getting a bit weaker. And this is something that we can say when we look at various fields. And when we look at the commerce side of the business, it's not exactly where we had always been very, very strong here. And so to, in this aspect, how could we be able to essentially increase the scale or the capacity of the service it's going to be very important. Now we have line and what kind of true synergy we be able to practice and there's also the PayPay and what kind of synergy in a true sense, would we be able to pursue? That is what Yahoo! is really going to be required to show. Now I, myself is more on the service development side. I'm not exactly from the marketing side and so advancement and commerce. It's, I'm not just going to look at commerce, but I also want to look at, for example, what we'd be able to do on the advertisement side. Now, marketing is not exactly just a, oh, of course, marketing is a promotion, but then it, it also needs to be linked to what kind of service we'd be able to create. And so again, how we be what to pursue the real growth, utilizing all these capabilities, the potentials that we have is really going to be important. And so that's exactly where I do want to focus as we try to show our strategy. And I do want to have an occasion where we be able to hear of your advice. I do want to do my best now, Yahoo! after 20 years, we're in a, a state where people would be a bit worried, but we want to make sure that everyone would feel confident in looking at Yahoo! and say, “Yes, this is a very interesting Company.” Thank you very much.

Mitsunobu Tsuruo: So a follow up question to that. Now we don't have Mr. Kawabe today, but Mr. Kawabe do you know how long he's been spending his time for Yahoo!, and now that part of time, where is it going to be spent from here as he tries to focus us as a CEO, co-CEO of Z holdings? Do you know?

Takao Ozawa: Well again, Mr. Kawabe is not here, so we can't really answer how many hours he's been spending for Yahoo! per se, but then from next year in onwards, the holdings and Mr. Kawabe is going to be looking at Z holdings, as well as all the group entities that would include Yahoo! as well as line. There's also other FinTech entities, as well as overseas entities. And Mr. Kawabe needs to spearhead the growth in these areas as well. So I'm sure he is going to be looking over all these varies of business so that the holdings as a group will be able to enhance the performance. That's exactly what he's going to be focusing on. At least that is my understanding.

Mitsunobu Tsuruo: Thank you very much, so, just one more question, if I may, so, as for the stake and the Demae-can. I know you haven't been able to win great reputation and some accounting issues we've observed that witnessed that now with all these issues and we, what kind of return you'd be able to expect including what you'd be able to do on a quick commerce. That's something I would like to hear from you?

Takao Ozawa: Yes. So for, so first for first for Demae-can. I know there's been a lot of concerns then raised by many people and I, myself, as I looking into the accounting and finance areas, I, to make sure that we do not cause anything of the, like again. Now for Demae-can the app download of course this is something that we cannot really specifically say, but at the point of December, we know that for example, within the delivery service that Demae-can has been to really come to a number one position thanks to a lot of promotion that's been launched. And of course, loss there's still loss, but in terms of the delivery de icon, I do believe we'll be able to increase the market share. But of course, when it comes to unit economy mix, though, we have to make sure that we be, we be able to work more on that for Demae-can, but we do have confidence that we'd be able to have a good growth. And now if also we would have anything to add yes, for food delivery, we are looking forward for great growth here quick commerce, Demae-can. The role of Demae-can, in the quick commerce space. It is something that is worth paying attention to. And so I, as a member of the director, I think so well -- well, I have been appointed to join as a director of the mic on, so I am hoping that we be able to exercise group synergy. We will make sure that we enhance governance so that we'd be able to create the Demae-can even a better business. So please look forward.

Operator: We are open for questions. [Operator Instructions] There seems to be no additional questions that we'd like to end the Q&A session. Finally Mr. Sakaue will speak closing remarks.

Ryosuke Sakaue: Well, thank you very much for coming to the Q3 business results call and thank you for your valuable feedback and advice today as well. So we would like to continue to work hard to enhance shareholder value. And we would like to ask you for your ongoing support. Thank you very much for your time today.

Operator: It all, that this concludes the holdings conference call. Thank you for participating until the very end.