Summary of Earnings Results Briefing
for Q1 FY2019
|Date||Monday, August 5, 2019 4:00 pm – 5:20 pm|
|Speakers||SoftBank Corp: Ken Miyauchi (President & CEO), Junichi Miyakawa (Representative Director & CTO), Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)|
Mr. Ken Miyauchi, President & CEO of SoftBank Corp., discussed two themes at the earnings results briefing: (1) consolidated results for Q1 FY2019 and (2) progress on growth strategy.
1. Consolidated Results
for Q1 FY2019
SoftBank Corp. made Yahoo Japan Corporation a consolidated subsidiary in June 2019. In the three months ended June 30, 2019 (April-June 2019, Q1 FY2019), revenue increased by 32% year on year to 1,164.9 billion yen due to the impact of the consolidation of Yahoo Japan Corporation. Operating income rose by 22% year on year to 268.9 billion yen. Net income attributable to owners of the Company increased by 6% year on year to 164.8 billion yen. In conjunction with the consolidation of Yahoo Japan Corporation, SoftBank Corp. has retrospectively adjusted its results for the fiscal year ended March 31, 2019 (FY2018) under the assumption that Yahoo Japan Corporation was made a consolidated subsidiary at the beginning of FY2018. Even when comparing the results for Q1 FY2019 with the retrospectively adjusted results for Q1 FY2018, SoftBank Corp. still delivered higher revenue and profit. Looking at segment performance, revenue increased across all segments. In terms of operating income, earnings declined in the Yahoo segment, where we actively made upfront investments, and in the Other business including PayPay. In contrast, our existing segments, Consumer, Enterprise, and Distribution achieved steady growth in earnings, supported by increased revenue. As a result, the overall operating income increased year on year. Moreover, looking at the progress of the results for Q1 FY2019 against the consolidated financial result forecasts for FY2019, the progress rate for operating income was 30% and that for net income attributable to owners of the Company was 34%, and both have progressed at a faster pace than our forecasts. In addition, following the listing of its shares, SoftBank Corp. has received high credit ratings independent of its parent company.
2. Progress on Growth Strategy
SoftBank’s growth strategy stands on three pillars: drive further growth in the telecommunications business, drive growth of Yahoo Japan, and expand new businesses.
Drive further growth in the telecommunications business
The telecommunications business, including Consumer and Enterprise, has achieved solid growth in its business performance.
In the Consumer segment, revenue increased 4% year on year, supported by strong business performance in mobile communications and broadband services. In mobile communications services, SoftBank supports a wide range of customer needs through three differentiated brands: SoftBank, Y!mobile and LINE MOBILE. Notably, we have embraced the goal of “100% smartphone penetration”, and are working to promote even more widespread adoption of smartphones. In June 2019, we began providing the “Smartphone Debut Plan” under the SoftBank brand. This price plan has proven popular with customers, with more than three times the number of subscribers enrolled than the previous plan. As a result of these initiatives, smartphone cumulative subscribers increased by 8% year on year to 22.45 million. In broadband services, cumulative subscribers for our main service SoftBank Hikari service increased by 15% year on year.
In the Enterprise segment, revenue increased by 5% year on year, with performance driven by growth in Business solution and others, which includes robotics, AI, robotic process automation (RPA), security and cloud services. Expansion of smartphone penetration for enterprise users has also made good progress. SoftBank has started Digital JAPAN initiative to solve social issues through digital transformation. Guided by Digital JAPAN, we have focused on providing new business solutions together with various companies. In the Enterprise segment, we will monetize these solution businesses and drive growth in existing businesses, aiming to double operating income in the 2020s against that in FY2018.
We have accelerated initiatives on 5G (fifth generation mobile communication) technology, where we will soon roll out services. In July 2019, we provided pre-commercial 5G services at a music festival for the first time in Japan. These services were offered at FUJI ROCK FESTIVAL ’19, one of Japan’s largest outdoor rock festivals. In the same month, SoftBank and KDDI Corporation announced that they have reached an agreement on the mutual use of their base station assets to jointly promote the rapid build-out of 5G networks in regions. This agreement is expected to give us several advantages in the build-out of 5G networks. For example, it will allow us to make capital investments more efficiently and facilitate the construction of more resilient networks.
Drive growth of Yahoo Japan
SoftBank Corp. has added the Yahoo segment from the current fiscal year. The segment has posted steady growth, with revenue up 3% year on year.
The number of monthly logged-in user IDs for Yahoo! JAPAN increased by 11% year on year, along with an increase of 9% year on year in e-commerce transaction value, indicating steady business expansion. By taking full advantage of the communications technologies of SoftBank, the big data of Yahoo Japan Corporation and the cutting-edge technologies of the SoftBank Group AI portfolio companies, we will create a future that no other company can repeat.
Expand new businesses
Our new businesses have also been growing steadily.
Total cumulative registrations for PayPay, a smartphone payment service, exceeded 9.8 million in August 2019. To cultivate users’ habit of using PayPay more regularly, we have launched monthly revolving campaigns since June 2019. In addition, we are expanding the use of PayPay from offline in real stores to online. In June 2019, PayPay began to enable online payments for services such as Yahoo! Shopping, an online shopping mall service and YAHUOKU!, an online auction and flea market service. In addition, we are planning a new e-commerce service with a name featuring the “PayPay” brand, scheduled to be rolled out in autumn 2019. Also, as a benefit to our mobile customers, SoftBank and Y!mobile smartphone users can now pay the charged amount to their PayPay account together with their monthly service fees on one bill.
WeWork, a provider of cutting-edge workspaces using AI, has been rapidly expanding business in Japan. In one year and four months since the start of services in Japan, WeWork has opened 19 locations in five cities nationwide. WeWork has also contributed to grow the businesses of its tenant companies by actively facilitating communication among those companies.
SoftBank has established a joint venture with OYO Hotels & Homes (OYO), a fast-growing global hotel operator that has built the world’s second largest hotel chain in terms of the number of guest rooms in only six years since its founding. The joint venture is scheduled to begin services in Japan in September 2019. It will conduct an innovative hotel business that leverages OYO’s hallmark features such as total consulting for hotels and AI-based dynamic pricing.
DiDi is a taxi-hailing platform that uses AI to predict demand for taxis. In 10 months since the launch of the service, the DiDi app has become No.1 in Japan in terms of the number of monthly downloads among major taxi-hailing apps. Since April 2019, DiDi has rapidly expanded business by successively commencing services in eight cities throughout Japan, including Tokyo, Nagoya and Fukuoka.
In these ways, SoftBank will accelerate our new business development through collaboration with our partners inside and outside of Japan including SoftBank Group portfolio companies in various business areas.