Analysis of Operating Results

Consolidated Results

Revenue

  • For the nine months ended December 31, 2020, revenue increased by ¥189.1 billion (5.2%) year on year to ¥3,807.0 billion, with increases seen in all segments. Revenue increased by ¥36.9 billion in the Enterprise segment mainly due to increased demand for telework-related solutions, by ¥114.2 billion in the Yahoo segment mainly due to an increase in e-commerce transaction value, by ¥8.4 billion in the Consumer segment due to an increase in service revenues, and by ¥16.0 billion in the Distribution segment due to large-scale ICT project orders from the municipalities.

Operating income

  • For the nine months ended December 31, 2020, operating income increased by ¥46.5 billion (5.8%) year on year to ¥841.6 billion, with increases seen in all segments. Operating income increased by ¥16.0 billion in the Enterprise segment, ¥18.7 billion in the Yahoo segment, ¥7.5 billion in the Consumer segment, and ¥3.6 billion in the Distribution segment.

Net income attributable to owners of the Company

  • For the nine months ended December 31, 2020, net income attributable to owners of the Company decreased by ¥2.9 billion (0.7%) year on year to ¥433.8 billion. While there was an increase in operating income, this was partially offset by an increase in financing costs of ¥17.1 billion due to the losses on valuation of investment securities held by the Company, an increase in impairment loss on equity method investments of ¥13.9 billion that was associated with treatment of impairment loss equivalent to goodwill of WeWork Japan GK, and an increase of ¥19.2 billion (59.0%) year on year in net income attributable to non-controlling interests, mainly due to an increase in earnings at the Z Holdings Group.

Adjusted free cash flow*1

  • In the nine months ended December 31, 2020, adjusted free cash flow was positive ¥530.7 billion, an increase of ¥385.2 billion year on year. This mainly reflects an increase of ¥245.9 billion year on year in cash inflows from operating activities due to an increase in deposits in the banking business, and decrease of ¥190.6 billion in cash outflows from investing activities. The decrease reflects an year on year decrease due to payment for the acquisition of control of a subsidiary associated with the consolidation of ZOZO, Inc. in the same period of previous fiscal year, although there was an increase due to payment for share acquisition related to the joint tender offer for shares of LINE Corporation and an increase in payment for the purchases of property, plant and equipment and intangible assets.

[Notes]
  1. *1
    Adjusted free cash flow = free cash flow ± total cash flows relating to non recurring transactions with SoftBank Group Corp. + (proceeds from the securitization of installment sales receivables ‐ repayments thereof)
  2. *2
    Excludes Z Holdings Group and the impact of adopting IFRS 16
  3. *3
    Sum of Z Holdings' FCF and dividend payments from Z Holdings to SoftBank Corp. (FY19 Q1-Q3: ¥5.4 bn, FY20 Q1-Q3: ¥18.8 bn)
    (including impact of IFRS 16 in Z Holdings)

Revenue by segment

Consumer segment

  • Revenue*4

  • Segment income

Consumer segment revenue increased by ¥8.4 billion (0.4%) year on year to ¥2,044.3 billion. Mobile communications revenue decreased by ¥8.0 billion (0.6%) year on year. This decrease was mainly due to a decline in average unit price due to discount programs for price plans of the SoftBank brand and increases in the number of Y!mobile and LINE MOBILE subscribers, even though an increase in smartphone subscribers led by the Y!mobile brand contributed to a revenue increase, in addition to recording of revenue due to a reversal of contract liabilities related to Half-Price Support. As a result, mobile communications revenue decreased year on year. Broadband revenue increased by ¥10.4 billion (3.6%) year on year. This increase was mainly due to an increase in subscribers to the SoftBank Hikari fiber-optic service. Electricity revenue increased by ¥30.5 billion (66.9%) year on year. This increase was mainly due to an increase in subscribers to the Ouchi Denki (Home Electricity) service. Revenues from sales of goods and others declined by ¥24.5 billion (5.7%) year on year to ¥404.5 billion, mainly due to a decrease in mobile device sales reflecting decreases in the unit prices of mobile devices.

The total of operating expenses (cost of sales and selling, general and administrative expenses) and other operating income and loss (other operating income and other operating expenses) was ¥1,469.3 billion, an increase of ¥0.9 billion (0.1%) year on year. This increase was mainly due to an increase in the cost of products for the Ouchi Denki (Home Electricity) service, while there was a decline in sales commissions due to the impact of amendments to the Telecommunications Business Act and also a decrease in the cost of products in connection with an increase in the sales mix of relatively low-cost mobile devices.

As a result, segment income increased by ¥7.5 billion (1.3%) year on year to ¥575.1 billion.

[Note]
  1. *4
    In the nine months ended December 31, 2020, Electricity, which was previously included in Revenues from sales of goods and others is presented separately due to its increase in materiality, and thus the breakdown for the nine months ended December 31, 2019 has been restated accordingly.

Enterprise segment

  • Revenue

  • Segment income

Enterprise segment revenue increased by ¥36.9 billion (7.8%) year on year to ¥507.8 billion. Mobile revenue increased by ¥21.0 billion (10.2%) to ¥227.0 billion, fixed-line revenue decreased by ¥4.5 billion (3.1%) to ¥142.0 billion, and business solution and others revenue increased by ¥20.3 billion (17.2%) to ¥138.7 billion.
The increase in mobile revenue was mainly due to an increase in smartphone subscribers following growing demand for telework, etc. The decrease in fixed-line revenue was mainly due to a decrease in the number of subscribers to telephone services. The increase in business solution and others revenue was mainly from increased revenue from cloud services and security solutions atop growing demand for telework-related products due to the impact of the COVID-19 outbreak, along with increased revenue related to IoT products and others.

The total of operating expenses (cost of sales and selling, general and administrative expenses) and other operating income and loss (other operating income and other operating expenses) was ¥414.7 billion, an increase of ¥20.8 billion (5.3%) year on year. This increase mainly reflects an increase in costs following the abovementioned increase in business solution and others revenue.

As a result, segment income increased by ¥16.0 billion (20.8%) year on year to ¥93.1 billion.

Distribution segment

  • Revenue

  • Segment income

Distribution segment revenue increased by ¥16.0 billion (4.4%) year on year to ¥379.8 billion. This was mainly due to large-scale project orders from the municipalities and solid growth in the focused subscription services such as cloud and SaaS.

The total of operating expenses (cost of sales and selling, general and administrative expenses) and other operating income and loss (other operating income and other operating expenses) was ¥360.1 billion, an increase of ¥12.4 billion (3.6%) year on year. This increase was mainly due to an increase in costs of products in connection with the abovementioned increase in revenue.

As a result, segment income increased by ¥3.6 billion (22.3%) year on year to ¥19.6 billion.

Yahoo segment

  • Revenue*5

  • Segment income

Yahoo segment revenue increased by ¥114.2 billion (15.0%) year on year to ¥873.8 billion. Commerce revenue increased by ¥111.8 billion (21.1%) to ¥641.2 billion, media revenue increased by ¥4.1 billion (1.8%) to ¥230.5 billion, and other revenue decreased by ¥1.7 billion (45.0%) to ¥2.1 billion.
The increase in commerce revenue was mainly due to consolidation of ZOZO, Inc., an increase in shopping-related advertising revenue and an increase in transaction value in existing commerce services. The increase in media revenue reflected an increase in display advertising revenue in connection with increased media service traffic due to the impact of the COVID-19 outbreak and multiple product improvement measures.

The total of operating expenses (cost of sales and selling, general and administrative expenses) and other operating income and loss (other operating income and other operating expenses) was ¥731.6 billion, an increase of ¥95.5 billion (15.0%) year on year. This increase mainly reflected increases in selling, general and administrative expenses accompanying the consolidation of ZOZO, Inc.

As a result, segment income increased by ¥18.7 billion (15.1%) year on year to ¥142.2 billion.

[Notes]
  1. *5
    In the nine months ended December 31, 2020, the Z Holdings Group transferred certain service and subsidiary from the commerce business to the media business. In accordance with this change, the breakdown of commerce and media in revenue for the Yahoo segment for the nine months ended December 31, 2019 has been restated.
  2. *
    Transactions under common control are accounted for as if such transactions were executed by SoftBank Corp. and its subsidiaries on the later of the acquisition date of the transferred companies by SoftBank Group Corp. or the opening balance sheet date of the comparative period.

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