Summary of Earnings
Results Briefing
for FY2023

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Date Thursday, May 9, 2024 4:00 pm - 5:35 pm
Speakers SoftBank Corp.
Yasuyuki Imai (Director & Chairman)
Junichi Miyakawa (President & CEO)
Jun Shimba (Representative Director & COO)
Kazuhiko Fujihara (Board Director, Executive Vice President & CFO)

Summary

At the earnings results briefing, Mr. Junichi Miyakawa, President & CEO of SoftBank Corp., discussed the consolidated results for FY2023 and consolidated forecasts for FY2024. In addition, Mr. Miyakawa discussed the approach to consolidated forecasts for FY2024 and targets of medium-term management plan, progress by segment toward targets of medium-term management plan, progress toward building next-generation social infrastructure, and an update on ESG.

1. Consolidated Results
for FY2023

Company-wide Results

  • Revenue for FY2023 was ¥6,084.0 billion, up 3% year on year. Revenue increased in 4 segments (Enterprise, Distribution, Media & EC, and Financial).
  • Operating income was ¥876.1 billion, up 14% year on year*1. Profit increased in all reportable segments, including the Consumer segment. The Enterprise and Media & EC segments achieved double-digit growth.
  • Net income attributable to owners of SoftBank Corp. (hereinafter, “net income”) was ¥489.1 billion, up 45% year on year*1.
  • Revenue, operating income, and net income all exceeded the upwardly revised consolidated forecasts (announced in February 2024).
  • Adjusted free cash flow*2 was ¥532.8 billion. Excluding investment in Cubic Telecom Ltd. (¥67.5 billion, hereinafter, “Cubic Telecom”) and generative AI-related investments such as investment in SuperPOD (¥7.3 billion, financed with proceeds from the Series 1 Bond-Type Class Shares), SoftBank Corp. generated a high level of adjusted free cash flow on par with FY2022.
  • We plan to pay a year-end dividend per common share of ¥43*3 as committed at the beginning of fiscal year (annual dividend per share of ¥86).

2. Consolidated Forecasts for FY2024

  • Consolidated forecasts for FY2024 and operating income forecasts by segment are shown in the table below.
  • Excluding a one-time factor of +¥9.0 billion recorded in FY2023 (reversal of provisions for litigation), we expect operating income in the Enterprise segment to increase by ¥11.4 billion, or 7% from the previous fiscal year.
  • Other of -¥61.0 billion (a decrease of ¥55.2 billion year on year) is forecast based on growth investments, such as investments in generative AI.
  • Dividends per common share is forecast at ¥86*4 on an annual basis. We plan to maintain a high level of shareholder return.
FY2023 result FY2024 forecast Increase Percent change
Revenue ¥6,084.0 billion ¥6,200.0 billion +¥116.0 billion +2%
Operating income ¥876.1 billion ¥900.0 billion +¥23.9 billion +3%
Net income attributable to owners of SoftBank Corp. ¥489.1 billion ¥500.0 billion +¥10.9 billion +2%
FY2023 result FY2024 forecast Increase Percent change
Consumer ¥495.5 billion ¥530.0 billion +¥34.5 billion +7%
Enterprise*5 ¥167.2 billion ¥170.0 billion +¥2.8 billion +2%
Distribution ¥26.2 billion ¥28.0 billion +¥1.8 billion +7%
Media & EC ¥198.0 billion ¥230.0 billion +¥32.0 billion +16%
Financial -¥5.0 billion ¥3.0 billion +¥8.0 billion -
Other*5 -¥5.8 billion -¥61.0 billion -¥55.2 billion -
Total ¥876.1 billion ¥900.0 billion +¥23.9 billion +3%

3. Approach to Consolidated Forecasts for FY2024
and Targets of Medium-term Management Plan

  • In the medium-term management plan announced in May 2023, we announced an operating income target of ¥970.0 billion for FY2025.
  • In FY2023, business remained steady, primarily in the Consumer and Media & EC segments. As a result, operating income of over ¥930 billion in FY2024 and over ¥1,000 billion in FY2025 can be generated on a run rate basis.
  • To achieve further growth during the next medium-term management plan period, we decided to allocate our higher-than-anticipated profits to growth investments in generative AI, etc. We aim to achieve our current medium-term management plan while investing in growth for the next medium-term management plan.
  • To build a large language model (LLM) specialized for the Japanese language with 1 trillion parameters, we announced that we will invest approximately ¥150.0 billion to enhance computational capabilities of AI computing infrastructure. We aim to be a market leader in the field of generative AI, which is expected to expand dramatically in the future.
  • Additionally, we are pushing ahead with the development of solutions utilizing generative AI. We launched a joint development project with Microsoft Japan Co., Ltd. To develop an automation solution for call center operations. In addition to implementing this solution to our own call centers, we are considering external sales to enterprise customers in the future.

4. Progress by Segment Toward Targets of
Medium-term Management Plan

  • Our medium-term management plan targets by segment and the progress made toward them are outlined in the table below.
Medium-term management plan targets
(FY2023 - FY2025)		 Progress in FY2023
Consumer segment Mobile service revenue:
To hit bottom in FY2023 and return to growth		 Achieved by hitting bottom and returned to growth 1 year ahead of schedule in FY2023
Segment income:
To hit bottom in FY2022 and return to growth		 Achieved by surpassing upwardly revised segment income target (announced in February 2024)
Enterprise segment Business solution and others revenue:
Double-digit compound annual growth rate (“CAGR”)		 Increased 16% year on year
Segment income:
Double-digit CAGR		 Increased 13% year on year*6
Distribution segment Segment income:
¥30.0 billion (FY2025)		 ¥26.2 billion in FY2023 (increased 8% year on year)
Media & EC segment Improvement of business efficiency and renewed growth of Media, Search, and Commerce Business from FY2024 and beyond Segment income increased 24% year on year through selective focus on key business areas and cost optimization
Financial segment Segment income:
Turn profitable by FY2025		 Loss reduced significantly
Aiming to turn segment profitable in FY2024

Progress on growth strategies for each segment

1. Consumer segment

  • Net additions of smartphone subscribers were 1.47 million in FY2023.
  • To improve ARPU (Average Revenue Per User), we have been working to enhance value-added services and have begun providing “Pay-toku”, a new plan utilizing PayPay.
  • As part of our efforts to expand our group ecosystem, we have announced a policy to conduct a stock split (10-for-1)*7 and provide shareholder benefits (provide ¥1,000 worth of PayPay Points)*8.
  • To accelerate 5G deployment and maximize capital expenditure efficiency, we will further expand collaboration with KDDI CORPORATION. We aim to build a cumulative total of 100,000 base stations*9 by 2030 while aiming for ¥120 bn*9 in CAPEX reduction impact.

2. Enterprise segment

  • Initiatives in new areas for future growth (generative AI-related solution, data center, and cloud service) were explained.
  • On April 25, 2024, SoftBank Corp. announced the conversion of SB Technology Corp. into a wholly owned subsidiary. By concentrating SB Technology Corp.'s extensive engineering resources and high technical capabilities, we will accelerate the growth of the Enterprise segment through synergies.
  • We reached an agreement with Honda Motor Co., Ltd. (hereinafter, “Honda”) whereby Honda will consider implementing Cubic Telecom's global connectivity platform. The target areas are the entire world except for North America and China (approximately 70 countries and regions). By capturing synergies with SoftBank Corp., Cubic Telecom aims to acquire more than 100 million connections by the end of FY2030.

3. Media & EC segment

  • We aim to drive the growth of various services, such as search, advertising, and commerce, by strengthening service origins including enhancing attractiveness of LYP Premium and renewing LINE and Yahoo! JAPAN app.
  • Currently discussing the review of capital relationship of LY Corporation with NAVER Corporation.

4. Financial segment

PayPay Corporation:

  • Consolidated gross merchandise value (GMV) in FY2023 was ¥12.5 trillion, up 22% year on year. The cumulative number of registered users of PayPay was 63.04 million as of the end of FY2023.
  • Consolidated EBITDA*10 was ¥9.8 billion. PayPay Corporation achieved positive consolidated EBITDA for the first time on a full-year basis.
  • As part of efforts to diversify financial services, PayPay Corporation launched “PayPay Shikin Chotatsu (PayPay Funding)”.

SB Payment Service Corp.:

  • Gross merchandise value (GMV) in FY2023 was ¥8.0 trillion, up 19% year on year. GMV exceeded the target laid out in the medium-term management plan (CAGR of over 15% for GMV from FY2023 to FY2025).

5. Progress Toward Building
Next-generation Social Infrastructure

  • The AI-RAN Alliance was established in February 2024, with the aim of creating a new AI communication platform.

6. Update on ESG

  • As part of our efforts to strengthen governance in order to continuously enhance corporate value, we plan to change the composition of the Board of Directors. The ratio of external directors will be increased to a majority to ensure independency of the board.
  • The renewable energy ratio relative to our own electricity use*11 was 48% in FY2023. We are making steady progress toward the targets laid out in the medium-term management plan (a ratio of 50% by FY2025 and a ratio of 100% by FY2030 (of which, more than half is to be procured from power generated from renewable energy sources)).
[Notes]
  1. *1
    Excluding the re-measurement gain associated with making PayPay Corporation a consolidated subsidiary, which was recognized in Q3 FY2022.
  2. *2
    Adjusted free cash flow = free cash flow + (proceeds from securitization of installment sales receivables - repayments thereof). Excludes free cash flow of A Holdings Corporation, LY Group, B Holdings Corporation, PayPay Corporation, PayPay Card Corporation, PayPay Securities Corporation, and PPSC Investment Service Corporation, and loans to Board Directors, etc. and includes dividend from A Holdings Corporation. Before deduction of repayment of lease liabilities (rent expenses on telecommunication facilities and real estate, etc.), which is recorded as cash flows from financing activities. The actual amount for FY2023 is ¥118.4 billion.
  3. *3
    The year-end dividend for FY2023 is scheduled to be submitted for approval to the Board of Directors of the Company at a meeting planned for May 17, 2024.
  4. *4
    Subject to approval of the proposal on the amendment to the Articles of Incorporation by the Company's 38th Annual General Meeting of Shareholders scheduled to be held on June 20, 2024, the Company plans to conduct a stock split whereby each share of the Company's common shares will be split into 10 shares, with the effective date being October 1, 2024. Dividend per share for FY2024 does not take into account this stock split.
  5. *5
    From FY2024, SB Technology Corp. and Cybertrust Japan Co., Ltd., etc., which were previously classified as Other, will be transferred to the Enterprise segment. As a result, the figures for the Enterprise segment and Other for FY2023 have been retrospectively adjusted. Please note that these retrospectively adjusted figures are currently under review.
  6. *6
    Excluding the reversal of provisions for litigation (¥9.0 billion) recorded in FY2023.
  7. *7
    The record date of the stock split will be September 30, 2024. Each share of the Company's common shares held by shareholders entered or recorded on the final shareholder register on the record date will be split into 10 shares. The stock split is conditional upon approval of the proposal on the amendment to the Articles of Incorporation by the Company's 38th Annual General Meeting of Shareholders scheduled to be held on June 20, 2024.
  8. *8
    Shareholders entered or recorded for at least one year with the same shareholder number in the Company's final shareholder register on March 31 (record date) of each year and held the Company's common shares of 100 (one unit) or more are eligible. “Entered or recorded for at least one year” refers to shareholders entered or recorded with the same shareholder number in the Company's final shareholder register on March 31 and September 30 at least 3 consecutive times. The program will begin for shareholders holding the Company's common shares of 100 (one unit) or more and entered or recorded in the Company's final shareholder register as of March 31, 2026.
  9. *9
    Cumulative results from FY2020 to FY2030.
  10. *10
    For PayPay on a consolidated basis. EBITDA is calculated by adding depreciation and loss on disposal of non-current assets to operating income (with each fiscal year including figures for 12 months). The figure is based on IFRS and is non-audited.
  11. *11
    The total for SoftBank Corp. and Wireless City Planning Inc.