Z Holdings Corp

TSE:4689

Earnings Call Transcript 2021-Q4

[Operator]

[Interpreted] Thank you very much for your patience. We would like to resume the session. Thank you very much for participating in FY '20 Full Year and Q4 Earnings Briefings of Z Holdings.

We will be using the earnings presentation material loaded on the home page of Z Holdings. The participants from Z Holdings are as follows. We have Mr. Kentaro Kawabe, Representative Director, President, Co-CEO; Representative Director, Co-CEO; Mr. Takeshi Idezawa; and Mr. Takao Ozawa, Director, Senior Managing Corporate Officer; and Mr. Hwang In-Joon, CGIO; and Mr. Ryosuke Sakaue, GCFO; and also Mr. Chiaki Fujimon, GCTO; and from Yahoo!, we have Corporate Officer, Mr. Hiroshi Kataoka. Firstly, we would like to have Mr. Kawabe give the presentation on FY '20 full year and Q4 earnings results. Afterwards, the flow will be open for Q&A. We plan to allocate about 90 minutes for the whole session.

Now without further ado, Mr. Kawabe, please.

[Kentaro Kawabe, executive]

[Interpreted] I am Kentaro Kawabe of Z Holdings. Thank you for participating in the full year and fourth quarter financial results briefings for fiscal 2020, despite your busy schedule.

Firstly, we apologize for creating concern over the way LINE has handled personal information. On April 23 and 26, LINE received guidance from the Personal Information Protection Commission and MIC, respectively. We take their guidance very earnestly and are committed to improve data governance and security of LINE and bear the responsibility in managing and supervising the undertaking. Although this is an earnings briefing, allow me to explain the progress and status of the improvement measures taken by LINE and Z Holdings.

The current situation at LINE. We have completed blocking the access from our bases in China and revised our privacy policy. Also regarding the images and videos that were stored overseas, we are proceeding with the transfer of data to Japan. Based on what has happened, we have set up a Special Advisory Committee, comprised of experts to verify and evaluate the handling of data throughout the group from the perspective of the data governance and security. We are planning to hold the first special committee meeting today. Based on the recommendations of the committee, we will conduct in-depth discussions and take responsibility as the parent company and supervise and manage and strengthen the data governance and security system of the whole group, so that users can be rest assured.

Please take a look at the next page. After the media coverage of LINE's information management situation, there has been no significant change in the use of services by users, businesses, government agencies and municipalities. At this point, the impact on the group's business performance is expected to be minimal, and the medium-term target for FY '23, which was presented at the briefing on March 1, has not changed. We will continue to incorporate the advice of the Special Advisory Committee to further enhance the transparency of our services and aim to restore trust as soon as possible.

Next page, please. Now a review of FY 2020. In FY '20, given the impact of the pandemic, we have been agile in carefully managing our business and giving considerations to various scenarios. We have actively developed and provided about 120 functions and services to support people's lives during the pandemic. In addition, we have shifted to online working style. On average, 95% work remotely but our business productivity and engagement levels are maintained. We have challenged many new business areas. At the outset of FY '20, we have listed 3 priorities: one, business integration with LINE; two, full development of Scenario Finance; three, full scale provision of integrated marketing solution. These are all on track.

Next page, please. Topics for full year financial results. Revenue was JPY 1.2 trillion, up. And as a matter of fact, Yahoo! JAPAN celebrated 25th anniversary. And when I became the President of Yahoo! JAPAN, 3 years have already passed. And Internet has the history of 25 years along with Yahoo!. And we believe that the possibility of our employees as well as the technology can be further developed, so we will be able to make leaps and bounds and increase the revenue, i.e., top line. And as a result, we believe that our stock will be deemed as the growth cap. And that is the framework in which I have been working as the President of Yahoo! JAPAN.

And due to those efforts in FY 2020, once again, revenue was JPY 1.2 trillion, up 14.5% year-on-year, achieving a double-digit growth for the second consecutive year. In the last year's briefing, we mentioned that Z Holdings revenue went to JPY 1 trillion level. And in this fiscal year, we were able to record JPY 1.2 trillion. And so with the double-digit growth, adjusted EBITDA was JPY 294.8 billion, up 18.8% year-on-year, thus increasing the bottom line as well.

The shopping business led to growth, registering an increase of 45.1% year-on-year. E-commerce transaction value exceeded JPY 3 trillion for the first time. And the growth of their advertising business drove the increase in LINE's revenue. LINE's full year operating income was JPY 26.3 billion. Even without the onetime gain, LINE became profitable in the second half, showing a favorable trend. In FY '21, we will accelerate PMI and generate synergies, while strengthening data governance and security system.

Next page, please. These are the 4 agenda items I will cover today. Next page, please. First, full year financial results. Next page, please. Both revenue and operating income increased, exceeding the guidance presented in Q2 earnings results briefing. Revenue posted a double-digit growth, a trend continuing from last year. Operating income was JPY 162.1 billion, a 6.5% increase year-on-year, driven by the revenue growth. Adjusted EBITDA, which is our new management index, was JPY 294.8 billion, an increase of 18.8% year-on-year.

Next page, please. Adjusted EBITDA adjust gains, losses on nonrecurring and noncash transactions within operating revenue and expenses. We believe that this information, which excludes the accounting effect, is useful in understanding the essential business results of the group.

Next page, please. Next, second half investment results. In Q2 financial results briefing, we announced that we will make aggressive investments in the second half to achieve medium- to long-term growth. In the first half, we restrained service activity expenses of about JPY 20 billion against the budget and flexibly reinvested part of the process that exceeded the budget in the second half. As a result, sales activity cost for Q4 increased by JPY 22.5 billion year-on-year, mainly investing in EC merchandise. Currently, there are some short-term regularities, such as the downturn from last year's increase of stay at home demand. However, we are seeing a positive trend in various KPIs that contribute to medium to long-term growth.

Next, results by business segments and topics. Next page, please. First, Commerce Business. Next page, please. EC transaction value exceeded JPY 3 trillion, mainly driven by the growth of the shopping business. Also, the transaction value of Reuse business, which has been flat for the past few years, was boosted due to the reduction of PayPay Flea Market listing fees implemented in January, which enhanced our competitiveness.

Next, Commerce of Yahoo!. In March, commemorating the business integration with LINE, we held Cho PayPay Matsuri, where consumers can shop at a great price if you are a PayPay user. Compared to the previous campaign in November last year, various KPIs have improved significantly and the group ecosystem has expanded strongly based on PayPay. According to our research, the awareness rate of Cho PayPay Matsuri was about 50% and the awareness rate of grand finale held on March 27 and 28 was about 50%.

This rate is extremely high compared to past Yahoo!'s campaigns. We regard such a campaign as one of the important measures that will lead to the expansion of the user base over the medium to long term, along with the effect of boosting transaction value. While maintain proper investment discipline, we will continue holding Cho Cho or Cho PayPay Matsuri, so that we can develop it into a national event.

Next, Yahoo! Shopping and PayPay Mall. Due to the past investments, transaction value recorded positive 25.6% for a 5-year CAGR, quite a high growth. While expanding transaction value, we have constantly acquired new customers and succeeded in retaining existing customers. From the perspective of lifetime value, we believe that the measures we have taken so far are reflected in the results. In addition, in-house payment ratio of Q4 reached a record high of 68.2%. Along with the profitability improvement, we believe that capturing users through PayPay ecosystem will contribute to medium- to long-term growth.

Next page, please. Next, I will explain on payment and Z financial. Next page, please. PayPay is growing robustly both in terms of user number and merchants. In particular, the number of payments exceeded JPY 2 billion for the full year. Although it is our own estimate, we believe that in a single month of March, the number of settlements grew to a level comparable to that of traffic IC cards, thanks to Cho PayPay Matsuri. At the beginning of the service, we received some skeptical opinions about whether QR code payment would really become popular in Japan. However, the fact that we were able to grow so much in just 2.5 years since the launch of the PayPay service is one of the results of our investment, and we believe that we were able to prove and give an answer. We will continue to lead the passive to a cashless society.

Please go to the next page. In terms of revenue, we will expand financial services based on the user base of PayPay. The financial business has been growing at an accelerated pace since the partnership with PayPay. We are currently working on rebranding the financial services under our own umbrella, and we will continue to provide convenient and seamless financial services to users and further expand the ecosystem of PayPay as a source of action.

Next page, please. This is one of the achievements of the Scenario Finance, which was one of the priority areas for fiscal 2020. In December last year, we launched unseen repair insurance, which can be purchased when purchasing home appliances on Yahoo!. Since then, the number of policies has been increasing a high rate and the coverage rate has reached the latter half of 10%. In particular, on the last day of the Cho PayPay Matsuri, the number of contracts secured in a single day reached 43,457, which we believe is a single day record for the Japanese channel.

This is also very unique because it was achieved without using any traditional marketing methods such as campaigns or user incentives. Shopping and PayPay Mall, we believe that the Scenario Finance concept, which can only be realized by our group, has been steadily penetrating the market, and we will continue to accelerate the momentum. Next page, please. Next is on the business performance and topics on Media Business.

Next page, please. Advertising-related revenue for the full year increased 3.7% year-on-year to JPY 357.8 billion. Although severe situation continued by the pandemic, the company maintained positive growth due to the expansion with shopping advertisement revenue, in line with the growth of the shopping business as well as the advertising in the Media Business through sales activities and product improvement efforts. On the other hand, with the expansion of stronger measures to prevent the spread of COVID and the declaration of the third state of emergency, the demand trends among advertising is still uncertain. This is the Media Business.

Please go to the next page. We completed the integration of Yahoo! Display Advertising platforms on April 1. Platforms, which used to be separate by each product, is now integrated, which made it all possible to place advertisement across products, enabling optimal ad distribution to meet the needs of advertising. With this integration, we opened sales channel for reservation-based advertising, which used to be limited to a few agencies. It has now expanded to about 100 companies. In the future, offline marketing solution will also be integrated to this platform, aiming for us to become a marketing platform that supports advertisers in the full funnel.

Next page, please. I will explain the business performance and topics of LINE, which we completed business integration this March. Next page, please. This indicates the quarterly consolidated financial results of LINE Corporation. At our company has been consolidated on accounting since March, so the results on this slide are the consolidated results of LINE. The LINE business result is disclosed after listing. And since last second half, business result is improving. In the second half of the fiscal year, operating income, excluding onetime losses, returned to profitability.

Next page, please. Display advertising and account advertising, the core products of LINE, remained strong with overall advertising revenue reaching JPY 41.6 billion, up 26.0% year-on-year. The number of LINE official accounts also remained strong, increasing 26.3% year-on-year. The number of LINE official account is very important in strengthening new sales promotions solutions, including CRM, which will be possible through the business integration we will continue to work on and expand the number of LINE official accounts.

Next page, please. Next, I'd like to share the medium to long-term outlook. Next page, please. This is the group's business and service growth policy. As I mentioned at the strategic policy briefing on March 1, we will dramatically grow around the 3 source of actions, which are Media, Commerce and strategy business. The group's strongest assets by making both strategic investments in information, communication and settlement.

Next page, please. As a result, we aim to achieve sales revenue of JPY 2 trillion in FY 2023 and to achieve adjusted EBITDA of JPY 390 billion, even after making bold strategic investments. Some investors have pointed out that our target profit level may be too low. With the business integration, the group's ability to generate cash has been further enhanced, which has enabled us to make large strategic investments aimed at medium- to long-term growth. And even with this investment, the EBITDA is going to be achieved by 300 -- to JPY 390 billion, and we would like to achieve a high top line growth.

Next page, please. In order to realize revenue JPY 2 trillion and at the same time the adjusted EBITDA of JPY 390 billion, the following table shows the major investment items required to achieve those targets for each of the business segment. Strategic investments for FY 2021 are currently expected to be JPY 20 billion to JPY 30 billion, but may be subject to change depending on the business environment.

At the strategic policy briefing on March 1, I said that we will make a strategic investment of JPY 500 billion over 5 years. So the amount of investment for this fiscal year may seem small in comparison. However, in the current fiscal year, we will first focus on strengthening data governance and security. In the long run, the amount of strategic investment over the next 5 years is expected to increase. We would like to ensure that these investments lead to medium to long-term growth and achieve the goals set for each businesses.

Next page, please. The following is a road map of the integration synergies expected to be generated through strategic investments and other means. Realization and maximization of synergy will take time. In the short term, we will focus on the reorganization of business domains and start testing new services with some measures to be implemented as soon as possible in the current fiscal year. In the mid to long term, we will work to realize business synergies by leveraging Japan's strongest assets, Yahoo! JAPAN, LINE and PayPay across the board.

Next page, please. Finally, I will explain the management policy and outlook for the current fiscal year. Next page, please. In this fiscal year, we will first focus on building a strong data governance and security system so that users can use the services of the Z Holdings Group with peace of mind. Since this is the first year of the integration with the LINE, we will steadily promote PMI. The Media Business is expected to be an area where synergies can be realized at a relatively early stage. As a result, for this, we will maximize advertising efficiency for our clients and expand our marketing solutions, making this a year to prepare the ground for future monetization.

In the Commerce Business, we will not only strengthen marketing campaigns, but also improve logistics and loyalty programs to improve the quality of sales side and test the development of social commerce by maximizing the communication functions of LINE. Finally, the strategic business, which we consider as a new pillar of future earnings, starting with the rebranding of each financial service, we aim to expand the number of members and bank accounts, which will serve as the monetization base.

Next page, please. As a first step towards synergies with LINE, on April 1, Yahoo! and LINE merged their corporate venture capital holdings yesterday -- excuse me, on April 1. We formed JPY 30 billion fund, new, which is one of the largest in Japan's corporate venture capital to further strengthen domestic and global investments. A new company, Z Entertainment, that will oversee Z Holdings and LINE's entertainment businesses is also announced today.

Next page, please this is the outlook for the current fiscal year. Currently, with the third state of the emergency was declared, the business environment is still unclear. Plus, this is the first year of the business integration with LINE. So we are giving a wide range of guidance. The guidance for each business is similarly broad, but we intend to emphasize top line growth and achieve the stated growth rates. As a result, we aim to achieve consolidated revenue growth from JPY 1.52 trillion to JPY 1.57 trillion and adjusted EBITDA growth from JPY 303 billion to JPY 313 billion in range.

Thank you very much for your kind listening.

[Operator]

[Interpreted] Thank you very much, Mr. Kawabe. We would like to start the Q&A session. Firstly, SMBC Nikko Securities, Mr. Maeda, please.

[Eiji Maeda, analyst]

[Interpreted] Hello? Can you hear me?

[Operator]

[Interpreted] Yes. We hear you all right.

[Eiji Maeda, analyst]

[Interpreted] You showed us a road map after the business integration. And you have the plan covering all the way up to FY '23. And at this point in time, what will be the image beyond FY '23? I know that you mentioned about the forecast covering 2023. And the market is not that bullish until then, and we should have expectations beyond 2023. So can you elaborate on beyond 2023?

[Kentaro Kawabe, executive]

[Interpreted] Thank you for your question. So we will be investing JPY 500 billion in 5 years. And of course, there will be new products coming after 2023. And there will be multiple services and products that can provide us with further revenue and profit. So after 2023, we will launch new services and be very energetic going forward. And through the LINE integration, we will be able to secure cash flow. So we believe that we will be able to secure high EBITDA.

We will be launching new products. But when you talk about 2023, I believe that the Internet environment will be changing dramatically. So we have EC and fintech, and we would like to further expand those as well. And I think time is not right for us to talk in details, and we will try to record the highest revenue in 2023. And then afterwards, we are conducting discussions as to how to go about it. And once we have something tangible to share with you, we will be more than happy to share the information with you. Nonetheless, beyond 2023, we will be very robust in pursuing further growth. That's all for me. Thank you very much.

[Eiji Maeda, analyst]

[Interpreted] I guess there is some limitation in number of questions that I can ask at once, right? Was it 1 question or 2 questions?

[Kentaro Kawabe, executive]

[Interpreted] You are allowed 2 questions at a time.

[Eiji Maeda, analyst]

[Interpreted] Then I would like to ask another question. It's another question on road map. There are some short-term projects and initiatives. In Q1 and Q2, what is the outlook of the new businesses that you will be starting? What will be the timing of the launch? And what will be the impact on the revenue? Can you elaborate on your undertakings?

[Kentaro Kawabe, executive]

[Interpreted] Regarding short term, you want to know what are the tangibles that we can talk about. Is that your question?

[Eiji Maeda, analyst]

[Interpreted] Yes. That's my question.

[Kentaro Kawabe, executive]

[Interpreted] We have the advertisement and the EC strategy. Regarding advertisement, mid-term wise, we are integrating the platform. And before that, mutual provision of advertisement will be conducted through the media. And also, we are going to link and integrate different organizations. By doing so, we will be able to increase the revenue and profit of advertisement. We have integrated marketing solutions. And Yahoo! and PayPay are coming up with marketing solution, and we're going to link that with LINE's official account. Talking about Commerce, we will leverage our LINE communication capacity so that social commerce products can be launched. And Yahoo!'s commerce service can be linked with the already launched LINE's social commerce, smart social shop or store. We would like to launch that this year as well. That's all from me.

[Operator]

[Interpreted] Next we would like to entertain questions from Ms. Munakata from Goldman Sachs Securities.

[Minami Munakata, analyst]

[Interpreted] This is Munakata from Goldman Sachs Securities. I have 2 questions from my side, too. For the outlook on the shopping businesses and the transaction volume is something that I would like to know. Looking through your material, it is from 12% to 25% range year-on-year. And compared to the advertising, the range seems to be larger. So from your perspective, what is going to be the determinator of the growth range in this business? That is my first question.

[Kentaro Kawabe, executive]

[Interpreted] Thank you very much for the question. The group CFO, Mr. Sakaue, will explain about the numbers, and Mr. Ozawa will be adding information on top if needed.

[Ryosuke Sakaue, executive]

[Interpreted] This is Sakaue. For the shopping business, the GMV outlook range was rather large is what your question was. One issue is, especially in the quarter 1, people were staying more at home. Therefore, the transaction volume was very high that with previous year. And this is a comparison with that period. Therefore, for this fiscal year compared to the last larger demand we still do not see the transparency. Therefore, the range is rather broad. And the other thing is, just mentioned by our Co-CEO, Mr. Kawabe. The smart project is here, and we're going to be strengthening our logistics distribution. And for those issues, right now, we're just under testing. Therefore, we do not have the concrete idea what is going to be determining the GMV. Therefore, we have our range rather broad. Mr. Ozawa, would you like to add?

[Takao Ozawa, executive]

[Interpreted] Yes, I would like to add. This is going to be a year which is difficult to read. Last year, the volatility was high. But then this year, too, based on year-on-year, by quarterly basis, I think there's going to be a lot of variation and fluctuation by Yahoo! Shopping for more businesses. And yesterday, we announced the results -- financial results. There are several Commerce Businesses and in total weekly numbers here. And for the Q4, for Yahoo! Shopping and PayPay Mall, the marketing cost is included.

Therefore, the range is large. And ZOZO is a good services. Therefore, the marketing cost, if it is going to be added, it's going to be extending more. And if there's not much marketing cost in that high range, we can secure a good range. According to the timing and according to the cost calculation, we have to see the overall condition about the Z Holdings, thereby, the mall businesses and vertical businesses. We're going to be working in conjunction, thereby the ranges now fit as a broad way.

[Minami Munakata, analyst]

[Interpreted] I have my second question. It is also about the Commerce Business. The Smart Store project is the source of question for me. Smart Store project. So you are going to be scheduling to launch it very early. And I think the investors have high interest. On the other hand, in Japan, there's already a similar services from other companies. So what is going to be different? What is going to be new? What is going to be the differentiation? And what kind of expectation do you have on the businesses for your business results?

[Kentaro Kawabe, executive]

[Interpreted] Mr. Ozawa is going to be answering on this.

[Takao Ozawa, executive]

[Interpreted] I am going to be answering mainly on the services. Therefore, the outlook for the business result will be added from Mr. Sakaue, if needed. As you just mentioned, the Smart Store project is based on -- we call this a unique domain, like the base and the Shopify is well-known in the world, and they launched similar services. We are coming in later and LINE, PayPay and Yahoo! is going to be working in conjunction, which is going to be our strength for -- our unique area. It's not a mall. So if it is going to be setting a shop in a desert, this is going to be a concern. And if you do not have a brand or if you do not have a power product yet, even if you open a shop, there's a concern that maybe the product will not sell. But then we have official accounts for the LINE. Therefore, the customers already have the account and starting e-commerce.

And in PayPay, if customers are already making settlement transaction by PayPay, through the Smart Store, the clients can start creating and shop. So whether it be online or offline, the client will not be losing their customers, but would still work on e-commerce. And this is the coordination with Yahoo! Shopping in the future, too. So Yahoo! Shopping merchants just by one click, there's going to be a function that this shop owner can launch the product by one click. So the merchants could be working on co-joint purchasing or else maybe sell some products just by one set of click, and that is going to be our biggest differentiation. And regarding the business result, I think Mr. Sakaue will answer. But from my side, this is also the answer.

[Ryosuke Sakaue, executive]

[Interpreted] For the FY 2021 business outlook, we are not factoring in, in a large sense about the business results from Smart Store project alone. And the LINE store Gift is -- LINE Gift has already started its services. Therefore, for some extent, there is an outlook included in for the fiscal 2021. But for the Smart Store, it is not factored in because we're going to be starting from here on.

[Operator]

[Interpreted] [Operator Instructions] Citigroup Securities, and Mr. Tsuruo, please.

[Mitsunobu Tsuruo, analyst]

[Interpreted] Can you hear me?

[Operator]

[Interpreted] Yes, we can hear you.

[Mitsunobu Tsuruo, analyst]

[Interpreted] Great. I have questions related to numbers. Firstly, about EBITDA guidance. When you look at the number of this fiscal year and the outlook for EBITDA, please tell me the breakdown? And after you answer that, I want to know about Commerce and Media. What will be the level of EBITDA for our Commerce and advertisement and Media?

[Kentaro Kawabe, executive]

[Interpreted] Okay. So Mr. Sakaue will be responding to that question.

[Ryosuke Sakaue, executive]

[Interpreted] Well, for FY '21, I don't have the numbers just for DA. So IR group will be following up. In terms of FY '21 full year guidance, we have the range, and we have different business segments, and I'll give you some ballpark figure. For Media, about JPY 230 billion will be the ballpark figure. And for Commerce, about JPY 145 billion. And for strategic business, JPY 10 billion negative. So that's the idea that we have at this point in time. And from Z Holdings, we have the common, and it will be minus about JPY 57 billion to JPY 60 billion.

[Mitsunobu Tsuruo, analyst]

[Interpreted] And I will get more granular figures offline from your IR team. I'm sorry. I did not ask you 2 questions, but let's move on. It's a question online. Looking at the presentation material, I understand that the strategic business expense went down, so you will be able to get in the black. And you have the growth forecast for the core business and reduction of loss for strategic business. So can you tell me the outlook on those 2?

[Kentaro Kawabe, executive]

[Interpreted] So firstly Mr. Sakaue will elaborate on the numbers. And Mr. Idezawa will talk about the overall picture.

[Ryosuke Sakaue, executive]

[Interpreted] I don't know whether I should talk regarding operating income or EBITDA, but for FY '21, operating income-wise, we will be able to be in the surplus. Now what is our grand plan? In core business, we want to drive further growth of advertisement. And so for the deficit of strategic business, we will have some balance but we believe that it can be offset by the revenue generated across the core business. So putting 2 and 2 together, operating income-wise, we will be able to be in the surplus.

[Mitsunobu Tsuruo, analyst]

[Interpreted] I have another follow-up question. Why do you have the balance of the deficit of strategic business? Because looking at Q4, you almost do not have any deficit left. So can you tell me what will be the remainder?

[Unknown Executive]

[Interpreted] Well, I guess it was misleading. You have JPY 10.6 billion. And we are trying to reshuffle by new segments, and we have the upgraded figure of JPY 10.6 billion. And for January and February, you see the footnote. The strategic business is minus JPY 9.4 billion. And as of March, we are transiting to new categorization. And I cannot give you the details as of today. That is why you see the numbers for January and February. And so it's not that in Q4, there was no deficit at all.

[Kentaro Kawabe, executive]

[Interpreted] Mr. Idezawa would add some colors to the answer.

[Takeshi Idezawa, executive]

[Interpreted] Firstly, regarding advertisement business, display ad has a very strong momentum, and that is continuing. And for account advertisement, we have synergy with Z Holdings, and I believe that we will be able to enjoy robust growth. So for the advertisement business of LINE, I believe that we will be in a very strong situation. And in terms of our strategic business, there are some businesses that are recording revenue. And I believe that our strategic business is growing as well. So in totality, we believe that -- what has been already mentioned is too, and that will continue in FY '21 as well. That's all.

[Operator]

[Interpreted] Next question is from Jefferies Securities, Mr. Sato -- Ms. Sato.

[Hiroko Sato, analyst]

[Interpreted] This is Sato from Jefferies Securities. I would like to know the breakdown of the EBITDA as well. So if you can tell me or please call me. And regarding the marketing cost, my question is I would like to make an image of this marketing cost. But how should I image the Q3 and Q4? You have been conducting the Cho PayPay Matsuri and you're putting in -- injecting marketing cost. And you had a fabulous result. For the first half, thinking about the next first half, are you going to be conducting the Cho PayPay Matsuri every quarter or not? I don't know about that, but what kind of an outlook in image do -- should I expect? In the second half, you did utilize abundant marketing costs. So even if you utilize this marketing cost, is it going to be nearly flat or not? So I would like to know about how you think about the marketing cost. That's my first question.

And the other question is about PayPay. Looking at the previous quarter, JPY 20 billion PayPay cost was utilized in the previous quarter. And then the LINE Pay is now working in conjunction. And LINE Pay, for the strategic businesses -- so LINE is going to be included in the strategic businesses for the first year. And is it going to be around JPY 20 billion for the next quarter? And if kind of think of that, I think how you allocate the numbers question, I think you're not going to be allocating everything to PayPay. So what I think about PayPay is that PayPay is going to be allocated within the business strategy. Is it the right way to understand? And I heard that you're going to be putting this combining together. So how should I understand this combining portion too?

[Kentaro Kawabe, executive]

[Interpreted] Thank you very much for that question. For the details, I think I would like to feed you back later on. But then the group CFO, Mr. Sakaue, will be answering as much as he can.

[Ryosuke Sakaue, executive]

[Interpreted] Regarding the marketing cost that you have mentioned, in the first half and Q1, Q2 last year, the JPY 20 billion in total was utilized for the cost because -- excuse me, JPY 20 billion was frozen because of COVID-19. And we are thinking that we're going to be running in the normal mode now. Therefore, the marketing cost will be higher than last year. That is the basic idea. And Yahoo! Shopping and PayPay Mall, the percentage of transaction volume is going to be the marketing cost. It is going to be related with the GMV in cost, and that has been operation.

For FY 2020, Yahoo! Shopping and PayPay Mall has been growing. Therefore, the grown portion, the marketing is going to be added on to the frozen portion. On the other hand, for the second half of FY 2020, the frozen costs that have been waiting for the usage and carried on compared to FY 2020, I don't think that marketing costs will not be observed as being higher. And the GMV for the shopping and the advertisement about last year has been a fluctuating year. Therefore, it is difficult to crunch the numbers, but that is one outlook that we have. That is for your first question.

And regarding your second question, I would like to add some information. And if I'm answering not quite on your questions, please tell me so. For LINE Pay, LINE Pay is going to be operated within the LINE from here on too. So the strategic businesses is still going to be under red, meaning that the adjusted EBITDA is going to be including some red from this business. And for 2022 April, the QR code part is going to be integrated. The integration and its concrete schedule is now under discussion. The current PayPay capital relation about LINE Pay QR area, the area in the deficit, it is going to be transferred, then it is going to be PayPay deficit. Therefore, after 2022, the transition is going to be shown on the PayPay side.

So the LINE Pay QR payment, how we're going to be bringing it over to the PayPay is undecided. Therefore, we do not see the scope of the changes. And for PayPay, PayPay is growing businesses. Therefore, the equity hold, it is still unseeable for us. So when the time comes, I would like to make an answer for your questions. Thank you very much.

[Hiroko Sato, analyst]

[Interpreted] May I have an additional question, please?

[Kentaro Kawabe, executive]

[Interpreted] Yes, please. Yes, please.

[Hiroko Sato, analyst]

[Interpreted] It's about the advertising business. And this is going to be adding on the LINE payment advertisement. And looking at your guidance, I think the guidance shows and indicates that you're going to be having 2-digit growth. So how much of a percentage is going to be coming from the contribution of the LINE? For me, I have the gut feeling that you could grow more. But what is the contribution from the LINE?

[Unknown Executive]

[Interpreted] So our guidance material, I think we are indicating this on Page 35, and the details are written on the bottom part. And the orange part, this is the revenue from the advertisement. And yearly, this is Yahoo! JAPAN advertisement. And year-on-year...

[Hiroko Sato, analyst]

[Interpreted] Now I understand. Now I understand. So you mean the green part is going to be added onto the Media Business. Okay. Now I understand the logic. Yes. So I expect highly for this very great growth.

[Operator]

[Interpreted] Let's move on. JPMorgan Securities, Ms. Mori, please.

[Haruka Mori, analyst]

[Interpreted] I have 2 questions. First question, you mentioned about the forecast for EBITDA by segment. And in terms of year-on-year comparison maximum, what will that be? And you have the adjusted EBITDA plan for FY '21. And how will EBITDA will fluctuate year-on-year? And heading towards JPY 390, you have JPY 230 billion and JPY 210 billion and minus JPY 10 billion. How do you think these numbers will fluctuate? So can you roughly give me the overall picture at this point in time?

Second question. Forecast for advertisement. I have some detailed questions. You have Yahoo! and LINE numbers here. And regarding the major advertisement, can you tell me what will be the forecast by product? Another question is about sales promotion market that you are aiming to capture. What is the contribution that you will be able to enjoy through the sales promotion products?

[Kentaro Kawabe, executive]

[Interpreted] Then group CFO, Mr. Sakaue, will give you some explanation on numbers. And if we need to add color, we will have other executives chime in.

[Ryosuke Sakaue, executive]

[Interpreted] Firstly, about EBITDA. In FY '21 and LINE has been consolidated for 1 month, and LINE advertising business is added on top of pre Z Holdings. So in terms of adjusted EBITDA Media, it will be between JPY 75 billion to JPY 80 billion. So that will be the growth of Media. And talking about Commerce, I mentioned about strategic investment, and there is some amount included in Commerce. And LINE has Commerce segment, and there is some negativity on that side. So Commerce will be minus JPY 10 billion year-on-year.

Talking about strategic segment, former Z Holdings-wise, we were able to generate surplus. About talking about the strategic business of LINE, they were in red. So it's about JPY 30 billion to JPY 40 billion. So there's a wide range regarding the strategic business segment. I think that's the overall picture I can give you right now. Did I answer your first question?

[Haruka Mori, analyst]

[Interpreted] So what is the breakdown of JPY 390 billion, so FY '23 trying to aim at JPY 390 billion?

[Ryosuke Sakaue, executive]

[Interpreted] For strategic business, in FY '23, we want to attain JPY 390 billion, but we will still be in the deficit, but I'm sure that deficit will be reduced to some extent. We have advertisement, Media and Commerce. And for both segments, we want to grow them, not only revenue-wise but also EBITDA as well. And that is the overall image that we have for those 2 business segments.

If it is okay, I would like to talk about the advertisement outlook. So centering around Yahoo!, we will be working on advertisement business. So in terms of full year, we expect the growth of 6% to 10%. Frankly speaking, we have search and display ads. And last fiscal year, there were fluctuations. So if it is okay, I would like to give you the overall image of Q1.

Talking about Q1, last year, for search advertisement, we have been impacted by the pandemic in some industry. So when I say the search advertisement, mid-10% to upper end of 10% is the level that we have. About YDN, last year, staying home was the norm. So many people use PCs and were exposed to media. So in Q1 it grew. So there will be the negative repercussion. So we believe that the growth will be in the single digits. So in totality, it's Z Holdings Yahoo! advertisement-wise, we believe that the growth will be latter half, of single digit or mid-teens. But in the latter half, the momentum will change. So full year-wise, I believe that the growth will be 6% to 10%.

Now let's move on to LINE advertisement business. Q4, we grew dramatically. So in FY Q1, I believe that the growth will be about 15%. Having said that, in Q3 and Q4, LINE advertisement grew in FY '20. So that is a very high comparison for FY '21. So full year-wise, the growth will be about 10% to 13%. So that is the response for the first part.

And for sales promotion, Mr. Kawabe will be responding to it.

[Kentaro Kawabe, executive]

[Interpreted] Yahoo!, PayPay and LINE, i.e., Z Holdings original marketing solution is the one that we are working at right now. Right now, we have PayPay gift, and we can't forecast the number of visitors. And last fiscal year, we have been focusing on these products. In this fiscal year, we are going to link with LINE accounts, and that is the new undertaking that we have on LINE.

But nonetheless, we are still in the test phase. So for national clients, we are asking them to try out the testing products so that they will feel enticed to purchase the final products. So for the marketing solution, I do not believe that the sales promotion product will not be a major contributor, but within the range of a single billion yen level. Our aim is to expand the usage amongst the national clients so that they will be able to experience the merit of using the Internet for their advertisement. That's all for me. Thank you very much.

[Haruka Mori, analyst]

[Interpreted] I have another question about LINE Official Account advertisement. I believe that you have been impacted by the pandemic last year. Do you think you will be able to rebound? And I think activity rate is the challenge. LINE has been integrated and not only the Official Account, but the active account will be important. And by using and increasing active account, you will be able to increase your business. But just looking at the presentation, it does not look that you have such a plan. So when you separate the display and account advertisement, what is your look for FY '21?

[Kentaro Kawabe, executive]

[Interpreted] So Mr. Idezawa will be responding to that question.

[Takeshi Idezawa, executive]

[Interpreted] So overall picture-wise, display growth is higher than account advertisement. And so the latter's growth rate is lower than display, but we believe that it will make a steady growth as well.

Regarding the number of accounts, given the pandemic, we are actually expanding the number of accounts. We are making improvements on the function so that you can open accounts via the net. Also, we have Yahoo! and SoftBank clients, and we have a collaboration between the sales team as well. So I believe that such a united sales force will contribute to the increased account numbers. Thank you.

[Operator]

[Interpreted] Next, Mr. Nagao from Nomura Securities.

[Yoshitaka Nagao, analyst]

[Interpreted] This is Nagao from Nomura Securities. So due to the limitation of time, I would like to have one question. So Commerce and others are growing and credit number of memberships. This is also about merchandise, too. And for FY 2021, when you are conducting scenario finance, this is going to be a very important part. Therefore, what is your strategy for the credit card business? That is my question, please.

[Unknown Executive]

[Interpreted] Thank you very much for your question. From the perspective of FY 2020, the credit card business on the first half, the overall marketing cost sales were done under the COVID-19 pandemic. However, the growth was not that great.

And for the second half, in order to make PayPay into a card business, we were working on the preparation, therefore, we have not been doing so much marketing. And PayPay made into card business from here on, we would like to have this business more stronger, therefore, we're going to be acquiring PayPay card and plastics. And irrespective of offline/online, we're going to be utilizing injecting marketing cost. Also by responding to payment later on, maybe the revolvement payment or deferred payment, that could be another way of receiving payment. This is going to be a focus point for this year. And I hope I answered your question. Thank you very much.

[Operator]

[Interpreted] Let's move on. Okasan Securities, Mr. Okumura, please.

[Yusuke Okumura, analyst]

[Interpreted] I am Okumura of Okasan Securities. Can you hear me?

[Kentaro Kawabe, executive]

[Interpreted] Yes, we can hear you.

[Yusuke Okumura, analyst]

[Interpreted] I have 2 questions. You have explained on Page 25, the synergy with LINE. Last time, you mentioned about the advertisement synergies and you said that you will link the IDs. And you said that you will start that early on so that, that will contribute to increasing the accuracy of targeting advertisement. In the first half of this fiscal year, do you plan to go about this undertaking? And based on that, what kind of synergy can you expect for the revenue as well as the unit price? That's my first question.

Moving on to the second question. I want to confirm some details. You have FY '23 adjusted EBITDA of JPY 390 billion. You mentioned about the breakdown and you have the step acquisition. And is that included in JPY 390 billion? You have PayPay and you have a preferred stock for PayPay. And do you think you have factored that in, in adjusted EBITDA of JPY 390 billion?

[Kentaro Kawabe, executive]

[Interpreted] Okay. So I will answer the first question. And the second question will be answered by Mr. Sakaue. First question. Starting today, Apple IDFA iOS will be provided to the users. And Internet advertisement, we cannot use cookies anymore, so [ win-based ] data will be used. So maybe we have to leverage on different pieces of data in order to maximize on the impact of marketing and advertisement.

So log in will be very important. And the LINE is 100% log in and Yahoo!. We are trying in different endeavors so that we have about 50 million log in users. And we can further expand that. We will be able to enhance the marketing effect/impact. So we would like to link ID early on starting this fiscal year. And of course, we have to get the approval of the users.

Having said that, we have LINE and data management issue. So for now, we are going to enhance data governance and security. And based on that, we want to get the consent from the users so that ID linkage can be conducted. So at the very beginning, we were thinking about the quick linkage. But given the situation, we will postpone that for a month or 2. But sometime this fiscal year, we would like to start linking the IDs so that the linked ID will increase in the future and advertisement and marketing solution impact can be further enhanced. And that is the undertaking that we want to start this year and going into next year as well.

And I believe that there will be favorable impact in linking IDs. We are conducting internal analysis depending on the product that we provide, LINE advertisement unit price and Yahoo!'s advertisement unit price. When you compare, one might be higher than the other, and so we are going to align ourselves to the higher price level. But of course, we have to fine-tune after starting the service. And so we have to we try to make adjustments as we go along.

So Mr. Sakaue will be answering the second question.

[Ryosuke Sakaue, executive]

[Interpreted] Adjusted EBITDA, JPY 390 billion. And regarding the step acquisition, if there is any gain, that will be excluded from adjusted EBITDA. In short, say in PayPay, if there is any step acquisition gain, it will not contribute positively to adjusted EBITDA. So noncash and nonrecurring transactions will be excluded in order to give a picture of our financial results. That's all from me. Did I answer your question?

[Yusuke Okumura, analyst]

[Interpreted] Yes, I understood very well.

[Operator]

[Interpreted] Next from Mitsubishi UFJ Morgan Stanley Securities, Mr. Araki.

[Masato Araki, analyst]

[Interpreted] So my question is related to the previous question. So after the adjusted EBITDA, JPY 303 billion to JPY 313 billion was the range. And in terms of operating profit, I'd like to know the range? So [ 24 and 3 ], and after adjustment EBITDA, this is going to be a number that you have already showed. So for operating income, I would like to know.

And second question, it is about the business result of LINE company on Page 25. I think my peers have already made a question, but I would like to know more. For the January to March term, there's already information disclosed on the green bar. And the core businesses and the common business, I would like to know the separate numbers. And this common business is difficult to understand. It says JPY 7 billion, but what is the -- included in the revenue? Is it included within the adjusted EBITDA or not? So in conjunction with including this common business, I would like your answer, please.

[Kentaro Kawabe, executive]

[Interpreted] Thank you. Both 2 questions will be answered by our GCFO, Mr. Sakaue.

[Ryosuke Sakaue, executive]

[Interpreted] For the first question for the operating income, this is going to be undisclosed from here on, but we're now under transition. So operating profit income, we would like to increase our OP income. And after the adjustment EBITDA, the range, if it's going to be followed correctly, then it is going to be JPY 160 billion for operating income. We intend to land in that area. After the integration of LINE, the PPA and the stock revenue is also going to be upon the depreciation, amortization. But for the operating income, we would like to increase, too. That is my first point. And the second point...

[Masato Araki, analyst]

[Interpreted] With that answer, let me question. So you're going to be obtaining the target and the PPA and the reward, which is going to be on top. What do you mean by that?

[Ryosuke Sakaue, executive]

[Interpreted] So this is a stock reward, and PPA is going to be added on the cost, and it's going to be registered. But still, we would like to be increasing by JPY 165 billion. So excluding the PPA and the stock reward, you're going to be having a higher increase.

[Masato Araki, analyst]

[Interpreted] Is that so?

[Ryosuke Sakaue, executive]

[Interpreted] Yes. Please see as that. So that is going to be the upper limit. And the second point, for the March, this is the new segment for -- we have already transferred to the new area. Therefore, of ex LINE businesses for March is difficult to answer currently. Therefore, IR team is going to be following up your answer later on.

[Masato Araki, analyst]

[Interpreted] So what about the common cost, please?

[Ryosuke Sakaue, executive]

[Interpreted] Right now, it says JPY 7 billion for the common businesses for the foothold. And this is going to be the sales profit for the selling off. And this is already realized. So if we calculate in the adjustment EBITDA, it is going to be working as a positive.

[Operator]

[Interpreted] Next, CLSA Securities, and Mr. Oliver Matthew, please.

[Oliver Matthew, analyst]

Okay. I'll ask my question. Could you tell us about PayPay Mall? What is working well? What is not working well? And what growth expectations you have? That's the first question.

[Kentaro Kawabe, executive]

[Interpreted] So regarding PayPay Mall, you want to know what is going well and what is not going well, and you want to know what is the growth level. And so Mr. Ozawa, who is in charge of this business, will be responding to that question.

[Takao Ozawa, executive]

[Interpreted] Regarding PayPay Mall, we are continuing constant growth in terms of the number of merchants and also the merchandise and buyers. All the KPIs are on par with the target that we have defined. So if we have marketing investment, we know that there will be positive response. And once we have players such as ZOZO, there is a very virtuous cycle of positive growth.

Having said that, what are the challenges that we have to make improvements, distribution and how we're going to show and select the merchandisers? As compared to the competitors, we are lagging behind. Right now the current users, like the point that they gain despite some points that we have to make improvements on. In order to entice non users for them to move from Amazon or Rakuten to PayPay Mall, we have to make improvements in the logistics distribution and the way we select merchandisers. And we want tenants, such as ZOZO with a great assortment, to join PayPay Mall. So those are the challenges, and at the same time, a leeway for further growth.

[Oliver Matthew, analyst]

Okay. My second question is on e-commerce brands. Do you think you have too many? I mean you have Yahoo! Shopping, PayPay Mall, LOHACO, Yahoo! Auctions, ZOZO. Is there any plan to merge them? Or what kind of synergies might you be able to find to increase the profitability of your e-commerce business?

[Unknown Executive]

[Interpreted] Thank you very much for your question. As you have mentioned, in terms of EC brand, there are multiple brands, as you have mentioned. But having said that, we had individual service concept under each brand, and they have different users and provide these services. So currently, we want to maximize on the characteristics and merits of each brand.

But we believe that we need to collaborate and link the services. And I believe that loyalty program across the board will be one way to go. PayPay STEP is the PayPay loyalty program, and Yahoo! Shopping and PayPay Mall are integrated. So once that is completed, LINE and other across the group program can be implemented. We will have different name, but we believe that we will be able to provide with a single front experience to the users so that we will be able to enjoy further revenue. That's all for me.

[Operator]

[Interpreted] From Snow Lake Capital, Mr. Saito, please?

[Yusuke Saito, analyst]

[Interpreted] Snow Lake, Saito. Can you hear me please?

[Kentaro Kawabe, executive]

[Interpreted] Yes.

[Yusuke Saito, analyst]

[Interpreted] I have 2 questions. One is, it is going to be the integration of PayPay and LINE and the QR payment system. If you think about the value, the pro forma equity, right now, you have 25% and 31%, including the preferred stock that you own. And I think the ratio should be higher. But as a management, do you think the same way? Especially the SoftBank Group does not want to decrease the number of shares that they hold for them. Maybe they would like to integrate -- not integrate but by integrated by caps. So can you comment on this as far as you can comment, please?

And the second question is about for the SoftBank Group, there was a comment that you would like to have PayPay, make it into an app. But then for yourself, I think you would like to make LINE a super app. Therefore, as a logic -- as a shareholder of Z Holdings, I would like you to show us, indicate the logic, please.

[Kentaro Kawabe, executive]

[Interpreted] Thank you very much. And regarding the second point, your question was unclear. It was difficult to hear, please refrain.

[Yusuke Saito, analyst]

[Interpreted] For the second question. So as the SoftBank Group, they probably prefer PayPay to make it into a super application. But for yourselves, you would like to make a super application from LINE. And I think this is a different logic. Therefore, are you going to be working to make both an application? Or are you going to be working or thinking differently with the SoftBank Group? So I would like a comment on that, please.

[Unknown Executive]

[Interpreted] Thank you very much on your comment and question. For question number one and question two, I think I would like to answer in one answer together. The PayPay payment infrastructure, SoftBank Group and Z Holdings Group, I think this is a very important foundation, and the 38 million users are already utilizing this platform. But we intend to grow this even more because LINE is going to be or already a service that is utilized by the whole nation of Japan, and we think it is going to be growing even more.

But how to grow this platform? We would like to make it into a payment that the Internet provider and the business organizer will be handling. We do not want to make it into a platform as the financial businesses would do. We would like to provide good experiences. And the Z Holdings creating LINE and the PayPay, it should be working in the forefront for making into an application.

The overall business model of PayPay, when forming this, the financial businesses -- the main financial businesses would be provided from the Z Holdings, like card businesses and bank businesses. That is what we deemed from the perspective of ratio of shares, whether -- irrespective of this, thinking of who is going to be leading these differences. We, the Z Holdings, will be working as the main actor.

Within this activity, you were talking about the super applications. And within our group, fortunately, we have 3 different -- there's a possibility of creating 3 different super apps. One is the PayPay, the super app that is people utilizing the payment. And second is about communication, extending into the horizontal way. And third, it is about information collection to be widely spread. This is YJ app.

So we have a great, fabulous, 3 big fleet, which has great features already, and we would like to make all these 3 into a super app or application. And when making this into a super app, looking in the overall SoftBank Group, there is no tug-of-war or differences in the mindset of making which app into a super application. So there is no discussion about intending which to make it into a super application. We want to make all 3 into a super app.

The collection of the information -- or can we really make all these 3 into a super app? We have to start trying. But then all these 3 apps has already several thousand, millions of people utilizing. Therefore, we are very confident that this is going to be a good app. And based on such logic, we would like to make all 3 of them into a good application. Thank you very much.

[Yusuke Saito, analyst]

[Interpreted] So one confirmation on Page 59, the PayPay equity hold. When LINE Pay is going to be integrated, LINE Pay is 100% held by you. Therefore, the equity is going to be larger, naturally. So is that the understanding that I should hold?

[Unknown Executive]

[Interpreted] We made an announcement of the integration and how to integrate or how to judge on the value. This is going to be the further discussions. But about the value, LINE Pay has great value, too. And the financial services in Z Holdings also have a equal value comparable to. Therefore, within the SoftBank group, the payment and the financial businesses, the larger value is held by Z Holdings.

[Operator]

[Interpreted] It is close to the closing time. So we would like to solicit one final question. Macquarie Capital Securities, Mr. Han Joon Kim, please.

[Han Joon Kim, analyst]

Great. I just have 2 quick questions. Number one, when you talk about social commerce for LINE, are we thinking about having a separate brand for it as well? And are we talking about a little bit more on the gifting or virtual items and fiscal goods sales on that platform or if it's going to be fiscal goods oriented? So that's kind of question number one.

Question number two is, I think your competitors on the ground as well as globally, there's a lot of investment going into fulfillment and logistics and trying to support a same-day or next-day delivery process. When I look at your road map, there's not a lot of information about how you plan to improve the underlying logistical capabilities. So if you could just kind of help us think through whether you think that's important for you guys to work on and just simply haven't had time to put it in the road map? Or do you think it's a less important factor for you guys to consider for the next few years?

[Kentaro Kawabe, executive]

[Interpreted] Thank you very much for your question. So firstly, I, myself, Kawabe, would like to respond. And then I would like Mr. Ozawa to add some color to my answer.

Firstly, about LINE Commerce Business, you asked whether we plan to provide under a different brand? And I believe that we will have LINE XYZ as a name, and we have multiple. So we have LINE Gift which is already announced and also Live Commerce and gathering, which is co-purchase. And these are the areas that we would like to challenge. LINE Gift has been already launched. So this will be the centerpiece, and we hope that we will work on penetrating the market. And the name stays the same, which is LINE Gift.

Regarding the goods, right now, we are handling multiple digital items. And going forward, we have Yahoo! e-commerce products. And we want to come up with a mechanism in which those physical goods can be provided through Gift. So that is the synergy that we will be working on. That's the answer for the first question.

Moving on to the second question. So when you look at Page 31, which is our synergy map, this shows the synergy between LINE and Yahoo!. So logistics is not included. We have been focusing on e-commerce by Yahoo!. And needless to say, our e-commerce is getting large in size. And in order to be #1, we have to enhance the quality of logistics, and we do understand that need. And in FY '21, we would like to enhance the quality of the service, which boils down to the logistics.

So we have to make improvements to the logistics systems that we have. And so of course, we will put effort in logistics. So with Yamato Holdings, we are going to work together. So by having the partnership with them, we can use their service in Yahoo! and PayPay Mall, so the store can use Yamato Holdings and enhance the experience.

And in terms of LINE, there is a service called Demae-can, which is food delivery service. Right now, in terms of the operator of Demae-can, they only transport food. But in terms of last one mile, Demae-can might be able to transport goods as well, not only food. And the discussion is underway. And once that becomes a reality, we will be able to incorporate that as one of the synergies. So far, so good.

So that's all for me, and maybe Mr. Ozawa might want to add.

[Takao Ozawa, executive]

[Interpreted] Well, I don't have anything more to add. So that was our answer.

[Operator]

[Interpreted] Now the scheduled time to end the presentation is going to be over. We would like to close. And upon closing, we would like to ask Mr. Kawabe for the closing remarks.

[Kentaro Kawabe, executive]

[Interpreted] Thank you very much for your participation out of your very busy hours. And for the LINE information management issue, we're very sorry for the issue because we put you into concern. We have been following the guideline. And following the guideline, we are already improving ourselves. We would not like to shrink ourselves, and we would like to create a concrete and a strong future.

With that mindset, we would like to create a robust business for this fiscal year, too. And the questions from your side was what's going to be happening after FY 2023? And I would like you to expect highly on us from this time. We're always running in order to achieve the midterm target. That is our way. Therefore, the revenue of 2023 for JPY 2 trillion and the adjustment revenue, the JPY 390 billion, we would like to achieve that and then focusing on the -- linking the businesses between LINE, ZOZO and others. And the JPY 2 trillion and JPY 390 billion, if that is going to be achievable in the visible way, then we're going to be thinking another target, and we're going to be start running to the next new target. And our investment is going to be very much made on the JPY 500 billion.

Therefore, lastly, again, I would like to emphasize that I would like you to be expecting highly on this with the member of the LINEs we are integrated and the capability in order for us to close our challenges. We have much more high capability, and we would like to create a very bright future also for the data governance and security, too. I would like your understanding on this. Therefore, thank you very much for continued support from your side. Thank you.

[Operator]

[Interpreted] With this, the telephone meeting of the Z Holdings will be closed. Thank you very much for your participation.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]