Analysis of Operating Results

Consolidated Results

Revenue

  • For the three months ended June 30, 2021, revenue increased across all segments by ¥183.9 billion (15.7%) year on year to ¥1,356.6 billion as it did so in the previous fiscal years in 2018, 2019, and 2020. Revenue increased by ¥99.5 billion in the Yahoo! JAPAN/LINE segment, mainly due to increased revenue in connection with consolidation of LINE Corporation, by ¥67.7 billion in the Consumer segment, mainly due to an increase in revenues from sales of goods and others, by ¥9.0 billion in the Enterprise segment, mainly due to an increase in demand for solutions associated with digitalization, and by ¥7.2 billion in the Distribution segment, mainly due to a solid increase in revenue from subscription services.

Operating income

  • For the three months ended June 30, 2021, operating income increased by ¥3.2 billion (1.1%) year on year to ¥283.1 billion. While operating income decreased by ¥4.9 billion in the Consumer segment, earnings growth was led primarily by the Enterprise segment, where operating income rose 23% year on year. Operating income increased by ¥7.2 billion in the Enterprise segment, ¥0.8 billion in the Yahoo! JAPAN/LINE segment, and ¥0.6 billion in the Distribution segment.

Net income attributable to owners of the Company

  • For the three months ended June 30, 2021, net income attributable to owners of the Company decreased by ¥1.2 billion (0.8%) year on year to ¥151.0 billion. In addition to an increase in operating income, financing income rose by ¥7.9 billion, mainly due to gains on valuation of investment securities held by the Company, while income taxes increased by ¥13.8 billion, and net income attributable to non-controlling interests increased by ¥2.5 billion year on year. The increase in net income attributable to non-controlling interests was mainly due to the effect of a decrease in the share of voting rights of Z Holdings in connection with the business integration of Z Holdings and LINE Corporation.

Adjusted free cash flow*1

  • In the three months ended June 30, 2021, adjusted free cash flow was negative ¥31.4 billion, a decrease of ¥210.5 billion year on year. This reflects a decrease of ¥65.0 billion in net cash inflow from operating activities and an increase of ¥139.3 billion in net cash outflow from investing activities. The decrease in net cash inflow from operating activities mainly reflected an increase in outflows for the payment of trade and other payables and a decrease in inflows related to deposits in the banking business, while there was a decrease in income taxes paid. The increase in net cash outflow from investing activities mainly reflected payments for acquisition of investments associated with the purchase of shares of LINE Corporation (currently A Holdings Corporation) that were less than one unit as a result of the reverse share split.

[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 A Holdings Corporation, free cash flow of Z Holdings Group (Z Holdings Corporation and its subsidiaries), and loans to board directors, etc., and including dividends received from Z Holding Corporation.

Revenue by segment

Consumer segment

  • Revenue

  • Segment income

Consumer segment revenue increased by ¥67.7 billion (10.8%) year on year to ¥693.2 billion. Mobile revenue decreased by ¥3.8 billion (0.9%) year on year. The decrease reflects a decline in average unit price due to the effects of an increase in subscribers switching from the SoftBank brand to the Y!mobile and LINEMO brands and introduction of new price plans of the SoftBank and Y!mobile brands, while there was an increase in subscribers led by the Y!mobile brand and improvement related to Half-Price Support. Broadband revenue increased by ¥4.3 billion (4.5%) year on year. This increase was due to an increase in subscribers of the SoftBank Hikari fiber-optic service. Moreover, electricity revenue increased by ¥5.9 billion (31.3%) year on year. This increase was due to an increase in subscribers of the Ouchi Denki (Home Electricity) service. The increase in revenues from sales of goods and others was mainly due to increases in the sales volume and unit price of mobile devices associated with the recovery of mobile device sales, which had declined in the same period of the previous fiscal year due to the 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 ¥508.7 billion, an increase of ¥72.6 billion (16.6%) year on year. This increase was mainly due to an increase in the cost of products associated with the abovementioned increase in the sales volume of mobile devices and an increase in unit purchase price of them, and an increase in sales-related expenses due to the penetration of Toku Suru Support +, a device purchase support program.

As a result, segment income decreased by ¥4.9 billion (2.6%) year on year to ¥184.5 billion.

Enterprise segment

  • Revenue

  • Segment income

Enterprise segment revenue increased by ¥9.0 billion (5.5%) year on year to ¥171.5 billion. Within Enterprise segment revenue, mobile revenue increased by ¥5.7 billion (8.0%) to ¥77.6 billion, fixed-line revenue decreased by ¥0.7 billion (1.4%) to ¥46.6 billion, and business solution and others revenue increased by ¥3.9 billion (9.0%) to ¥47.3 billion. The increase in mobile revenue was mainly due to an increase in smartphone subscribers following growing demand for telework. 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.

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 ¥133.0 billion, an increase of ¥1.7 billion (1.3%) 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 ¥7.2 billion (23.2%) year on year to ¥38.5 billion.

Distribution segment

  • Revenue

  • Segment income

Distribution segment revenue increased by ¥7.2 billion (6.6%) year on year to ¥117.1 billion. This was mainly due to solid growth in subscription services such as cloud and SaaS, which have been strategic areas of focus.

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 ¥111.0 billion, an increase of ¥6.6 billion (6.3%) 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 ¥0.6 billion (11.5%) year on year to ¥6.1 billion.

Yahoo! JAPAN/LINE segment*3

  • Revenue*4

  • Segment income

Yahoo! JAPAN/LINE segment revenue increased by ¥99.5 billion (36.3%) year on year to ¥373.4 billion. Within Yahoo! JAPAN/LINE segment revenue, media revenue increased by ¥71.4 billion (94.4%) to ¥147.0 billion, commerce revenue increased by ¥20.5 billion (11.7%) to ¥195.5 billion, strategy revenue increased by ¥6.9 billion (33.4%) to ¥27.6 billion, and other revenue increased by ¥0.7 billion (28.9%) to ¥3.2 billion. The increase in media revenue mainly reflected the recovery of advertising demand and the product improvement initiatives, in addition to the consolidation of LINE Corporation. The increase in commerce revenue is mainly due to an increase in revenue of ZOZO, Inc. and the ASKUL Group, in addition to the consolidation of LINE Corporation. The increase in strategy revenue mainly reflected an increase in revenue in the FinTech*5 field, in addition to the consolidation of LINE Corporation.

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 ¥322.0 billion, an increase of ¥98.7 billion (44.2%) year on year. This increase mainly reflected an increase in expenses accompanying the consolidation of LINE Corporation and an increase in sales promotion expenses at Yahoo Japan.

As a result, segment income increased by ¥0.8 billion (1.5%) year on year to ¥51.4 billion.

[Notes]
  1. *3
    Along with the consolidation of LINE Corporation in connection with the completion of the business integration between Z Holdings Corporation and LINE Corporation in March 2021, “Yahoo” changed its name of reportable segment to “Yahoo! JAPAN/LINE” from the three months ended June 30, 2021.
  2. *4
    In the three months ended June 30, 2021, Z Holdings Corporation revised its management segments following its business integration with LINE Corporation in March 2021. Accordingly, from the three months ended June 30, 2021, “Strategy” has been added to the breakdown of revenues, and the breakdown has been revised with respect to certain services and subsidiaries. Additionally, revenues for the same period of the previous fiscal year have been restated to reflect these changes.
  3. *5
    FinTech is a term coined from the combination of finance and technology and refers to a variety of innovative services that combine financial services with information and communication technology.

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