Q&A at Earnings Investor Briefing for Q3 FY2022

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Date Friday, February 3, 2023 6:00 pm - 6:56 pm
Speakers SoftBank Corp.:
Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)
Takashi Naito (Vice President, Head of Finance and Accounting Division)
Osamu Akiyama (Head of Strategic Finance Division)
  • Total ARPU of mobile services was a little better than your forecast at the beginning of this fiscal year. What are the reasons for this?

    The situation has not changed much. We were cautious when we made an upward revision to the forecast for full-year ARPU decline to ¥230 year-on-year in FY2022 Q2. This is a result of several factors, including improvement of voice calls and options, as well as a decrease in switching of subscribers between brands which lead to ARPU decline.

  • While the decline of total ARPU in FY2022 is gradually narrowing down, is it correct to assume that the same trend will continue in the next fiscal year? In addition, the outlook for the impact of mobile service price reductions in FY2023 is ¥50 billion. Will this impact change with recent ARPU improvements?

    We expect ARPU improvements to continue in the next fiscal year, similar to this fiscal year. We expect that the impact of mobile service price reductions in FY2023 will improve slightly from the initial forecast, but not to the extent to change the forecast of ¥50 billion.

  • In the Consumer segment, is it correct to assume that the revenue excluding the deduction due to customer rewards programs represents the actual performance of the Company?

    Yes, that is correct.

  • Please tell us if the deduction from revenue due to customer rewards programs occurs only in FY2022. Please also explain the reasons for this treatment.

    We have made the same treatment of recording a deduction from revenue due to customer rewards programs in the past, but on a smaller scale. However, since it would be a significant burden on the operating income in the current period to recognize the cost for customer rewards programs as a lump-sum expense, we will make decisions by considering the balance of the content and effect of the measures. It is possible that we will implement a certain amount in FY2023 during periods of high demand, such as Q4 and the iPhone sales season.

  • Under IFRS (International Financial Reporting Standards), it is my understanding that the cost of acquiring customers is generally capitalized. Isn't this amount for customer rewards programs that is deducted from revenue an acquisition cost?

    Under IFRS, the principle is that compensation for agency activities such as sales commissions are capitalized and amortized, and the costs that are directly returned to customers are deducted from revenue.

  • In the Consumer segment, the customer acquisition-related costs for the full year of FY2022 were initially forecasted to increase by ¥60 billion year-on-year. Considering the increase of ¥28.9 billion year-on-year up to Q3 and the additional strategic investments allocated from Other, will the annual amount exceed the initial forecast of ¥60 billion?

    At the time of the initial forecast, we assumed that customer acquisition-related costs would be capitalized and deferred as before. However, in Q3, ¥15.9 billion of customer rewards programs aimed at returning value to customers was deducted from revenue. This expense is not capitalized and deferred, but recorded as a lump-sum expense in the current term. Sales of goods and others also includes the impact of customer rewards programs. When these are added together, the amount is larger than expected at the beginning of the term, and the funds are allocated from Other. These are good measures in terms of ensuring that returns to customers are thoroughly implemented on a nationwide level, we have to consider various balances because the burden on operating income for this term is also large. Since this is a matter of how expenses are recorded in accounting, there is no impact on cash flows.

  • The progress rate for the Enterprise segment in FY2022 is not good. Is the Company's target achievable?

    To be honest, progress in the Enterprise segment is a little weak, but demand will increase in Q4, especially in March, so we will make all our efforts until the end of the term. On the other hand, on a consolidated basis, we are progressing to a level where we can cover the expenses with what we have prepared in Other. We would like to construct a forecast not only for the current term but also for the next term.

  • Will the Enterprise segment accelerate growth in the next fiscal year?

    We fell behind expectations in FY2022, but we are working hard, including the work force onsite, so that next year we can grow more than this year.

  • Regarding the operating income forecast for FY2022, of the losses of ¥40.3 billion in Other, you mentioned that about ¥30 billion will be used for strategic investments in the Consumer and Enterprise segments. What is the content of these strategic investments?

    In the Consumer segment, customer acquisition-related costs are expected to increase. We would like to resolve various existing issues, including those in the Enterprise segment, during this term. The cost for the sunset of services is also included. We will announce details when they are finalized.

  • There was an article stated that Z Holdings Corporation was considering making ZOZO, Inc. and ASKUL Corporation 100% subsidiaries. Please explain the impact and circumstances from the perspective of SoftBank Corp.

    I had not heard of such a fact and was surprised to see the article. Regarding Z Holdings Corporation, we appreciate its contribution to improving consolidated performance, such as making ASKUL Corporation and ZOZO, Inc. into subsidiaries. But I saw the possible issues with the growth of their core businesses, such as Yahoo Japan Corporation and LINE Corporation. Regarding the change in the management structure of Z Holdings Corporation announced on February 2, 2023, I think it a very good thing because it shows a stance of tackling the issues of the core businesses head-on.

  • What is the performance outlook for PayPay Corporation in the next fiscal year?

    PayPay Corporation is growing steadily. PayPay Card Corporation will spend sales promotion expenses together with our Consumer segment and e-commerce business in Z Holdings Corporation. In the next fiscal year, we will continue to increase PayPay Card acquisitions, and PayPay Corporation is expected to gradually improve its profitability and achieve growth.
    The basic approach is that it is important to sow the seeds for future growth rather than rushing to turn a profit in the near term.

  • Please tell us about the operating loss forecast of ¥19 billion for the Financial segment in FY2022. Also, is the loss of PayPay Card Corporation larger than that of PayPay Corporation?

    Q4 is an important period with many acquisition opportunities. We would like to acquire users for PayPay Card in conjunction with mobile sales activities and PayPay promotions. Acquisition costs for PayPay Card Corporation will increase, and the costs for PayPay Corporation will also be the largest in Q4. The forecast of ¥19.0 billion remains unchanged and is in line with expectations.

  • What is the business model we can understand from the balance sheet of PayPay Corporation?

    Since PayPay Corporation uses the money entrusted by customers to make payments, its balance sheet has a structural characteristic of holding a large amount of cash and a very large amount of deposits. Though the cash is not free to use at any time in nature, it is a model with stable working capital. In the future, if PayPay Atobarai (Pay Later) and the Financial segment expands, the balance sheet may change due to the expansion of assets and the liquidation of receivables.

  • Please tell us about the progress of capital expenditure in FY2022.

    Even if the capital expenditure for this term fluctuates, it will be about ¥10 billion against full-year forecast of ¥430 billion for FY2022. The amount is expected to be slightly lower than forecasted and will not interfere with business operations. It is expected that there will be no change in the forecast of ¥330 billion for the next fiscal year.