Analysis of Operating Results (Quarter)

Consolidated Results

Revenue

  • Consolidated Results Revenue
  • For the six months ended September 30, 2022, revenue increased by ¥84.3 billion (3.1%) year on year to ¥2,808.6 billion, increasing in all segments. Revenue increased by ¥33.9 billion in the Yahoo! JAPAN/LINE segment, mainly due to increased revenue from account advertising at LINE Corporation and search advertising at Yahoo Japan Corporation, in addition to increased commerce revenue, by ¥36.8 billion in the Distribution segment, mainly due to a solid increase in revenue from subscription services, by ¥11.7 billion in the Enterprise segment, mainly due to an increase in demand for solutions associated with digitalization, and by ¥7.1 billion in the Consumer segment. The increase in revenue in the Consumer segment was mainly due to an increase in electricity revenue reflecting volatilities in trade volume, price, and other factors in the electricity market, while there was a decrease in revenues from sales of goods and others, and mobile revenue decreased due to factors such as the impact of the introduction of new price plans.

Operating income

  • Consolidated Results Operating income
  • For the six months ended September 30, 2022, operating income decreased by ¥72.3 billion (12.7%) year on year to ¥498.6 billion. Operating income decreased by ¥49.0 billion in the Consumer segment mainly due to the impact of the introduction of new price plans, by ¥16.0 billion in the Yahoo! JAPAN/LINE segment mainly due to an increase in expenses to bolster human resources recruitment to achieve growth, and by ¥2.8 billion in the Enterprise segment due to factors such as the recording of a provision for litigation, and the impact of the reversal of a one-time expense recorded in the same period of the previous fiscal year, while there was the recording of a gain on step acquisition in connection with the conversion of HEALTHCARE TECHNOLOGIES Corp. into a subsidiary.

Net income attributable to owners of the Company

  • Consolidated Results Net income attributable to owners of the Company
  • For the six months ended September 30, 2022, net income attributable to owners of the Company decreased by ¥70.1 billion (22.8%) year on year to ¥237.1 billion. This mainly reflected a decrease in profit before income taxes, primarily due to a decrease in operating income, an increase in financing costs, which reflected the recording of losses on valuation of investment securities held and delay damages associated with litigation, and the recording of an impairment loss on equity method investments. Income taxes decreased mainly due to the abovementioned decrease in profit before income taxes.

Adjusted free cash flow*1

  • Consolidated Results Adjusted free cash flow
  • In the six months ended September 30, 2022, adjusted free cash flow was positive ¥343.4 billion, an increase of ¥275.5 billion year on year. This reflects a decrease of ¥490.6 billion in net cash outflow from investing activities, while there were decreases of ¥119.5 billion in net cash inflow from operating activities and effect of securitization of installment sales receivables. The decrease in net cash outflow from investing activities mainly reflected the following outflows recorded in the previous fiscal year: payments for the acquisition of trademarks and other assets for ¥178.5 billion in connection with the license agreement entered into by Yahoo Japan Corporation and payments for the purchase of shares of LINE Corporation (currently A Holdings Corporation) that were less than one unit for ¥115.2 billion as a result of the reverse share split.
    The decrease in net cash inflow from operating activities mainly reflected a decline in profit before income taxes for the six months ended September 30, 2022, and a decrease in inflows related to deposits in the banking business, while there was a decrease in income taxes paid.

[Notes]
  1. *1
    Free cash flow = net cash inflow from operating activities + net cash outflow from investing activities
    Adjusted free cash flow = free cash flow + (proceeds from the securitization of installment sales receivables ‐ repayments thereof)
  2. *2
    Excluding adjustments for free cash flow of both A Holdings Corporation and the Z Holdings Group, and loans to board directors, etc., and including dividend payments received from A Holdings Corporation

Revenue by segment

Consumer segment

  • Revenue

    Consumer segment Revenue
  • Segment income

    Consumer segment Segment income

Consumer segment revenue increased by ¥7.1 billion (0.5%) year on year to ¥1,385.5 billion. Mobile revenue decreased by ¥29.0 billion (3.6%) year on year. The decrease mainly reflected a decline in ARPU due to mobile service price reduction, while there was an increase in smartphone subscribers led by the Y!mobile brand. The decline in ARPU due to mobile service price reduction was mainly due to the effects of further switching of subscribers from the SoftBank brand to the Y!mobile and LINEMO brands and introduction of new price plans under the SoftBank and Y!mobile brands. Broadband revenue decreased by ¥3.7 billion (1.8%) year on year. This decrease was due to a decline in ARPU because of campaign initiatives, while there was an increase in subscribers of the SoftBank Hikari fiber-optic service. Electricity revenue increased by ¥75.1 billion (111.5%) year on year. This increase was mainly due to an increase in subscribers of the Ouchi Denki (Home Electricity) service and fluctuation of transaction volume and price in the electricity market. Revenues from sales of goods and others decreased by ¥35.3 billion (11.9%) year on year to ¥261.4 billion. The decrease was mainly due to a decrease in sales volume of mobile devices associated with a decrease in the number of mobile device upgrades.

Operating expenses*3 were ¥1,069.9 billion, an increase of ¥56.1 billion (5.5%) year on year. This increase was mainly due to an increase in the cost of products related to the Ouchi Denki service, while there was a decline in the cost of products associated with the abovementioned decrease in sales volume of mobile devices.

As a result, segment income decreased by ¥49.0 billion (13.4%) year on year to ¥315.6 billion.

[Note]
  1. *3
    Operating expenses include cost of sales, selling, general and administrative expenses, and other operating income and other operating expenses.

Enterprise segment

  • Revenue

    Enterprise segment Revenue
  • Segment income

    Enterprise segment Segment income

Enterprise segment revenue increased by ¥11.7 billion (3.3%) year on year to ¥362.5 billion. Within Enterprise segment revenue, mobile revenue decreased by ¥0.5 billion (0.3%) to ¥155.9 billion, fixed-line revenue decreased by ¥1.1 billion (1.2%) to ¥92.3 billion, and business solution and others revenue increased by ¥13.2 billion (13.1%) to ¥114.4 billion. The decrease in mobile revenue was due to a decline in sales of mobile devices in line with lower sales volume of mobile devices, while there was an increase in telecommunications revenue. 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 as a result of capturing enterprise customers' demand for digitalization arising from the COVID-19 outbreak.

Operating expenses were ¥291.3 billion, an increase of ¥14.5 billion (5.2%) year on year. This increase mainly reflected an increase in costs following the abovementioned increase in business solution and others revenue, the recording of a provision for litigation, and a reversal of a one-time expense in the same period of the previous fiscal year, while there was a decrease in operating expenses due to the recording of a gain on step acquisition in connection with the conversion of HEALTHCARE TECHNOLOGIES Corp. into a subsidiary.

As a result, segment income decreased by ¥2.8 billion (3.8%) year on year to ¥71.3 billion.

Distribution segment

  • Revenue

    Distribution segment Revenue
  • Segment income

    Distribution segment Segment income

Distribution segment revenue increased by ¥36.8 billion (15.6%) year on year to ¥273.0 billion. This increase was mainly due to solid growth in subscription services such as cloud and SaaS, which have been strategic areas of focus.

Operating expenses were ¥260.7 billion, an increase of ¥36.7 billion (16.4%) year on year. This increase was mainly due to an increase in cost of sales associated with the increase in revenue.

As a result, segment income increased by ¥0.1 billion (0.5%) year on year to ¥12.3 billion.

Yahoo! JAPAN/LINE segment

  • Revenue*4

    Yahoo! JAPAN/LINE segment Revenue
  • Segment income

    Yahoo! JAPAN/LINE segment Segment income

Yahoo! JAPAN/LINE segment revenue increased by ¥33.9 billion (4.5%) year on year to ¥784.9 billion. Within Yahoo! JAPAN/LINE segment revenue, media revenue increased by ¥3.0 billion (1.0%) to ¥304.3 billion, commerce revenue increased by ¥22.9 billion (5.9%) to ¥410.6 billion, strategy revenue increased by ¥6.8 billion (12.2%) to ¥62.4 billion, and other revenue increased by ¥1.3 billion (20.6%) to ¥7.6 billion. The increase in media revenue mainly reflected the acquisition of new official LINE account customers and an increase in advertising-related revenue associated with an increase in the number of broadcast messages by major customers at LINE Corporation, along with an increase in search advertising revenue at Yahoo Japan Corporation, while display advertising was adversely affected by business sentiment. The increase in commerce revenue is mainly due to an increase in transaction value of the ASKUL Group (ASKUL Corporation and its subsidiaries) and the ZOZO Group (ZOZO, Inc. and its subsidiaries) and an increase in travel-related revenue due to the restarting of economic activity. The increase in strategy revenue mainly reflected an increase in revenue in the FinTech field.

Operating expenses were ¥685.4 billion, an increase of ¥49.9 billion (7.9%) year on year. This increase mainly reflected an increase in personnel expenses in step with growth in the workforce at LINE Corporation, an increase in cost of sales at the ASKUL Group, and an increase in sales promotion expenses at Yahoo Japan Corporation, in addition to a one-time factor increasing expenses. The one-time factor increasing expenses was due to an increase of ¥15.1 billion reflecting the absence of a gain on the sale of YJFX, Inc. (currently Gaika ex byGMO, Inc.), which was recorded in the same period of the previous fiscal year, while there was a decrease of ¥9.2 billion in operating expenses, reflecting the recording of a gain on step acquisition in connection with the conversion of LINE MUSIC Corporation into a subsidiary in the six months ended September 30, 2022.

As a result, segment income decreased by ¥16.0 billion (13.8%) year on year to ¥99.5 billion.

[Note]
  1. *4
    In the six months ended September 30, 2022, the Z Holdings Group revised its management categories and reclassified the categories of certain services. Accordingly, the breakdown of Media, Strategy, and Other within the revenue of the Yahoo! JAPAN/LINE segment for the six months ended September 30, 2021 has been restated to reflect these changes.

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