Analysis of Operating Results

Consolidated Results

Revenue

  • For the six months ended September 30, 2020, revenue increased by ¥55.3 billion (2.3%) year on year to ¥2,428.4 billion. Revenue increased by ¥20.5 billion in the Enterprise segment mainly due to increased demand for telework-related solutions, and by ¥73.1 billion in the Yahoo segment mainly due to an increase in e-commerce transaction value. Revenue decreased by ¥34.8 billion in the Consumer segment due mainly to a decrease in revenues from sales of goods and others, and by ¥10.7 billion in the Distribution segment.

Operating income

  • For the six months ended September 30, 2020, operating income increased by ¥37.6 billion (6.8%) year on year to ¥589.6 billion, with increases seen in all segments. Operating income increased by ¥4.7 billion in the Consumer segment, ¥10.0 billion in the Enterprise segment, ¥0.9 billion in the Distribution segment, and ¥22.6 billion in the Yahoo segment.

Net income attributable to owners of the Company

  • For the six months ended September 30, 2020, net income attributable to owners of the Company decreased by ¥12.3 billion (3.8%) year on year to ¥315.1 billion. While there was an increase in operating income, this was offset by an increase in financing costs of ¥14.0 billion due to the losses on valuation of investment securities held by the Company, a decrease in gain on sales of equity method investments of ¥5.5 billion, an increase in income taxes of ¥17.5 billion mainly due to the increase in operating income, and an increase of ¥12.4 billion (64.8%) 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 six months ended September 30, 2020, adjusted free cash flow was positive ¥417.6 billion, an increase of ¥21.9 billion year on year. This mainly reflects an increase of ¥219.8 billion year on year in cash flows from operating activities due to an increase in deposits in the banking business, and decrease of ¥206.6 billion in cash flows from investing activities mainly due to payment for share acquisition related to the joint tender offer for shares of LINE Corporation and acquisition of securities in the banking business.

[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's FCF and dividend payments from Z Holdings to SoftBank Corp. (FY19 H1: ¥5.4 bn, FY20 H1: ¥18.8 bn)
    (including impact of IFRS 16 in Z Holdings)

Revenue by segment

Consumer segment

  • Revenue*4

  • Segment income

Consumer segment revenue decreased by ¥34.8 billion (2.6%) year on year to ¥1,301.3 billion. Mobile communications revenue decreased by ¥1.7 billion (0.2%) 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. On the other hand, smartphone subscribers increased, led by the Y!mobile brand, and achieved more than 25 million cumulative subscribers. This contributed to a revenue increase, in addition to recording of ¥11.0 billion to revenue due to a reversal of contract liabilities related to Half-Price Support. As a result, mobile communication revenue decreased year on year. Broadband revenue increased by ¥5.4 billion (2.9%) year on year. This increase was mainly due to an increase in subscribers to the SoftBank Hikari fiber-optic service. Electricity revenue increased by ¥18.8 billion (65.6%) 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 ¥57.3 billion (21.3%) year on year.The decrease in revenues from sales of goods and others was mainly due to a decrease in mobile device sales reflecting decreases in the unit prices and sales volume 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 ¥894.9 billion, a decrease of ¥39.5 billion (4.2%) year on year. This decrease was mainly due to a decrease in the cost of products in connection with an increase in the sales mix of relatively low-cost mobile devices and a decline in the sales volume of mobile devices, and also a decline in sales commissions due to the impact of amendments to the Telecommunications Business Act, while there was an increase in the cost of products for the Ouchi Denki (Home Electricity) service.

As a result, segment income increased by ¥4.7 billion (1.2%) year on year to ¥406.3 billion.

[Note]
  1. *4
    In the six months ended September 30, 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 six months ended September 30, 2019 has been restated accordingly.

Enterprise segment

  • Revenue

  • Segment income

Enterprise segment revenue increased by ¥20.5 billion (6.5%) year on year to ¥334.6 billion. Mobile revenue increased by ¥10.0 billion (7.3%) to ¥148.1 billion, fixed-line revenue decreased by ¥3.2 billion (3.2%) to ¥94.4 billion, and business solution and others revenue increased by ¥13.6 billion (17.4%) to ¥92.0 billion.
The increase in mobile revenue was mainly due to an increase in smartphone subscribers. 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 ¥270.0 billion, an increase of ¥10.5 billion (4.1%) 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 ¥10.0 billion (18.2%) year on year to ¥64.6 billion.

Distribution segment

  • Revenue

  • Segment income

Distribution segment revenue decreased by ¥10.7 billion (4.4%) year on year to ¥234.4 billion. This was mainly due to an increase in revenue from special high demand for PCs and servers for enterprise customers in the same period of the previous fiscal year.

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 ¥222.5 billion, a decrease of ¥11.6 billion (5.0%) year on year. This decrease was mainly due to solid growth in our focused subscription services such as cloud and SaaS.

As a result, segment income increased by ¥0.9 billion (8.6%) year on year to ¥12.0 billion.

Yahoo segment

  • Revenue*5

  • Segment income

Yahoo segment revenue increased by ¥73.1 billion (15.1%) year on year to ¥557.2 billion. Commerce revenue increased by ¥81.0 billion (24.3%) to ¥414.3 billion, media revenue decreased by ¥6.8 billion (4.6%) to ¥141.6 billion, and other revenue decreased by ¥1.1 billion (46.3%) to ¥1.3 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 revenue associated with an increase in transaction value in existing commerce services. The decrease in media revenue reflected a decrease in advertising revenue mainly due to a decline in ad placements centered on search advertising under the background of business sentiment deterioration, while there was an increase in display advertising revenue in connection with increased media service traffic and other factors due to the impact of COVID-19 outbreak.

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 ¥459.0 billion, an increase of ¥50.5 billion (12.4%) 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 ¥22.6 million (29.8%) year on year to ¥98.2 million.

[Notes]
  1. *5
    In the six months ended September 30, 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 six months ended September 30, 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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