Analysis of Operating Results (Quarter)

Consolidated Results

Revenue

  • For the nine months ended December 31, 2023, revenue increased by ¥166.1 billion (3.8%) year on year to ¥4,511.6 billion. Revenue increased by ¥83.3 billion in the Financial segment, mainly due to the consolidation of PayPay Corporation in October 2022, by ¥36.1 billion in the Distribution segment, mainly due to a solid increase in revenue from ICT (Information and Communication Technology) related products and subscription services, by ¥29.9 billion in the Media & EC segment, mainly due to increased revenue from account advertising and search advertising, and by ¥25.5 billion in the Enterprise segment, mainly due to an increase in demand for solutions associated with digitalization. On the other hand, revenue decreased by ¥5.9 billion in the Consumer segment, mainly from decreases in electricity revenue and mobile revenue, while there was an increase in revenues from sales of goods and others. For the nine months ended December 31, 2023, mobile revenue decreased by ¥3.8 billion year on year. The year-on-year decrease in mobile revenue was significantly mitigated, compared to the year-on-year decrease of ¥56.6 billion in the same period of the previous fiscal year, mainly due to the reduced impact of the mobile service price reduction in spring 2021 and an increase in smartphone subscribers.

Operating income

  • For the nine months ended December 31, 2023, operating income decreased by ¥250.1 billion (25.5%) year on year to ¥731.9 billion. This mainly reflected a decrease in operating income of ¥8.2 billion in the Consumer segment, mainly due to the impact of mobile service price reduction, and a decrease in operating income of ¥5.9 billion in the Financial segment, mainly due to the consolidation of PayPay Corporation, in addition to the absence of ¥294.8 billion associated with a gain on step acquisition in connection with the consolidation of PayPay Corporation, which was recorded in the same period of the previous fiscal year. On the other hand, operating income increased by ¥36.6 billion in the Media & EC segment, by ¥16.3 billion in the Enterprise segment, and by ¥1.6 billion in the Distribution segment.

Net income attributable to owners of the Company

  • For the nine months ended December 31, 2023, net income attributable to owners of the Company decreased by ¥101.9 billion (20.0%) year on year to ¥406.7 billion. This mainly reflected a decrease in operating income mainly due to the absence of a gain on step acquisition in connection with the consolidation of PayPay Corporation, which was recorded in the same period of the previous fiscal year. On the other hand, net income increased mainly due to the absence of losses on valuation of investment securities held and delay damages associated with litigation, both of which were recorded in the same period of the previous fiscal year, and the recording of a gain on changes in equity interest associated with the change in the LY Group's (LY Corporation and its subsidiaries) equity interest in Webtoon Entertainment Inc. in the nine months ended December 31, 2023. Net income attributable to non-controlling interests decreased by ¥27.2 billion (22.1%) year on year to ¥96.0 billion, mainly due to a decrease in net income at the LY Group.

Adjusted free cash flow*1

  • In the nine months ended December 31, 2023, adjusted free cash flow was positive ¥356.7 billion, a decrease of ¥750.5 billion year on year. This decrease reflected a decrease in net cash inflow from operating activities of ¥59.1 billion and an increase in net cash outflow from investing activities of ¥734.0 billion, while there was an increase in cash inflow from securitization of installment sales receivables. The decrease in net cash inflow from operating activities mainly reflected an increase in cash outflows associated with working capital, such as a decrease in trade and other payables.
    The increase in net cash outflow from investing activities mainly reflected an increase in purchase of investment securities in banking business and a decrease in proceeds from sales/redemption thereof in the nine months ended December 31, 2023, and the absence of a cash inflow from the acceptance of the balance of cash and cash equivalents resulting from the consolidation of PayPay Corporation, which was recorded in the same period of the previous fiscal year.

[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 the LY Group and PayPay, etc., and loans to board directors, etc., and including dividend payments received from A Holdings Corporation. PayPay, etc. includes A Holdings Corporation, B Holdings Corporation, PayPay Corporation, PayPay Card Corporation, PayPay Securities Corporation, and PPSC Investment Service Corporation.

Revenue by segment

Consumer segment

  • Revenue

  • Segment income

Consumer segment revenue decreased by ¥5.9 billion (0.3%) year on year to ¥2,121.8 billion. Mobile revenue decreased by ¥3.8 billion (0.3%) year on year. The decrease mainly reflected a decline in ARPU due to the mobile service price reduction in spring 2021, while there was an increase in smartphone subscribers mainly led by the Y!mobile brand. The decline in ARPU due to mobile service price reduction was mainly because of the penetration of price plans introduced in spring 2021 under the SoftBank and Y!mobile brands and further switching of subscribers from the SoftBank brand to the Y!mobile brand. For the nine months ended December 31, 2023, mobile revenue decreased by ¥3.8 billion year on year. The year-on-year decrease in mobile revenue was significantly mitigated, compared to the year-on-year decrease of ¥56.6 billion in the same period of the previous fiscal year, mainly due to the reduced impact of the mobile service price reduction in spring 2021 and an increase in smartphone subscribers. Broadband revenue increased by ¥4.7 billion (1.6%) year on year. This increase was mainly due to an increase in subscribers of the SoftBank Hikari fiber-optic service. Electricity revenue decreased by ¥54.1 billion (22.0%) year on year. This decrease was mainly due to a decrease in transactions in the electricity market. Sales of goods and others increased by ¥47.3 billion (11.0%) year on year to ¥476.1 billion. This increase was mainly due to an increase in the number of units sold and an increase in unit prices of smartphones, etc.

Operating expenses*3 were ¥1,698.7 billion, an increase of ¥2.2 billion (0.1%) year on year. This increase was mainly due to an increase in the cost of goods of smartphones, etc. due to an increase in unit purchase price and an increase in the number of units purchased, while there was a decrease in the cost of service of electricity.

As a result, segment income decreased by ¥8.2 billion (1.9%) year on year to ¥423.1 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

  • Segment income

Enterprise segment revenue increased by ¥25.5 billion (4.6%) year on year to ¥576.4 billion. Within Enterprise segment revenue, mobile revenue increased by ¥4.2 billion (1.8%) to ¥241.7 billion, fixed-line revenue decreased by ¥5.7 billion (4.2%) to ¥132.2 billion, and business solution and others revenue increased by ¥27.0 billion (15.4%) to ¥202.5 billion. The increase in mobile revenue was due to an increase in telecommunications revenue and an increase in mobile device sales. 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 from increased revenue mainly from cloud services and security solutions as a result of capturing enterprise customers' demand for digitalization.

Operating expenses were ¥451.7 billion, an increase of ¥9.2 billion (2.1%) year on year. This increase mainly reflected an increase in costs following the abovementioned increase in business solution and others revenue and the absence of a gain on step acquisition in connection with the consolidation of HEALTHCARE TECHNOLOGIES Corp., which was recorded in the same period of the previous fiscal year, while there was the absence of a provision for litigation, which was recorded in the same period of the previous fiscal year.

As a result, segment income increased by ¥16.3 billion (15.0%) year on year to ¥124.8 billion.

Distribution segment

  • Revenue

  • Segment income

Distribution segment revenue increased by ¥36.1 billion (8.6%) year on year to ¥455.6 billion. This increase was mainly due to solid growth in ICT (Information and Communication Technology) related products for enterprise customers and subscription services such as cloud and SaaS, which are also for enterprise customers and have been strategic areas of focus.

Operating expenses were ¥435.3 billion, an increase of ¥34.6 billion (8.6%) 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 ¥1.6 billion (8.3%) year on year to ¥20.3 billion.

Media & EC segment

  • Revenue*4

  • Segment income

Media & EC segment revenue increased by ¥29.9 billion (2.6%) year on year to ¥1,199.5 billion. Within Media & EC segment revenue, media revenue increased by ¥14.0 billion (2.8%) to ¥521.3 billion, commerce revenue increased by ¥9.1 billion (1.5%) to ¥610.2 billion, strategy revenue increased by ¥6.2 billion (10.8%) to ¥62.9 billion, and other revenue increased by ¥0.6 billion (13.6%) to ¥5.1 billion. The increase in media revenue mainly reflected an increase in revenue from account advertising and search advertising, and the impact of the consolidation of LINE MUSIC Corporation in September 2022. 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). The increase in strategy revenue mainly reflected an increase in revenue in the FinTech field.

Operating expenses were ¥1,036.0 billion, a decrease of ¥6.7 billion (0.6%) year on year. This decrease mainly reflected a decrease in sales promotion expenses and advertising expenses and the recording of a gain on business transfer associated with the transfer of AI Company business operated by LINE Corporation to WORKS MOBILE Japan Corp., while there was an increase in depreciation and amortization, an increase in personnel expenses, and an increase in cost of sales at the ASKUL Group.

As a result, segment income increased by ¥36.6 billion (28.8%) year on year to ¥163.5 billion.

[Note]
  1. *4
    In the three months ended June 30, 2023 and the three months ended December 31, 2023, the LY Group revised its management categories and reclassified the categories of certain services of Media and Other. Accordingly, the breakdown of all service categories in the Media & EC segment revenue for the nine months ended December 31, 2022 has been restated to reflect these changes.

Financial segment

  • Revenue

  • Segment income

Financial segment revenue increased by ¥83.3 billion (95.2%) year on year to ¥170.9 billion. This increase was mainly due to the consolidation of PayPay Corporation in October 2022.

Operating expenses were ¥174.4 billion, an increase of ¥89.2 billion (104.8%) year on year. This increase was mainly due to the effects of the abovementioned consolidation of PayPay Corporation.

As a result, segment income decreased by ¥5.9 billion year on year to negative ¥3.5 billion.

[Notes]
  1. *
    From the three months ended June 30, 2023, segment name of Yahoo! JAPAN/LINE has been changed to Media & EC. Accordingly, the five reportable segments became Consumer segment, Enterprise segment, Distribution segment, Media & EC segment, and Financial segment. This change only pertains to the segment name, and there are no changes to the segment classification, scope, or measurement methods.
  2. *
    On October 1, 2023, Z Holdings Corporation, as the surviving company, completed an intra group reorganization involving mainly itself and two of its core wholly owned subsidiaries, LINE Corporation and Yahoo Japan Corporation. On the same date, Z Holdings Corporation changed its trade name to LY Corporation.

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